*Chinese ADRs and tech stocks gain*
Chinese ADRs rebounded; Alibaba rose 4.68% to $110.80, Pinduoduo rose 3.34% to $77.90, JD.com rose 2.25% to $26.36, Baidu rose 3.17% to $86.99, Li Auto rose 1.50% to $10.85, NIO rose 1.48% to $3.42, XPeng rose 1.62% to $9.40, Beike rose 0.43% to $16.50, Trip.com rose 1.84% to $38.79, and Futu rose 7.37% to $109.70.
All ADRs closed higher than their corresponding H-share closing prices; Tencent (00700) ADR was 1.73% higher than its H-share, equivalent to HK$430.30; Xiaomi (01810) ADR was 1.08% higher than its H-share, equivalent to HK$24.10; Meituan (03690) ADR was 1.18% higher than its H-share, equivalent to HK$71.50; AIA (01299) ADR was 1.43% higher than its H-share, equivalent to HK$69.90; HSBC (00005) ADR was 1.22% higher than its H-share, equivalent to HK$151.70; HKEX (00388) ADR was 1.08% higher than its H-share, equivalent to HK$382.10.
*Bullish positions hold firm while bearish positions increase ahead of potential rebound in Hang Seng Index*
Morgan Stanley's report immediately boosted investor sentiment toward AI stocks, as the market sees underlying support for AI stocks' outlook. One Morgan Stanley note even successfully withstood the negative impact of rising yields, driving U.S. stocks higher overnight. Asian markets maintained a positive tone this morning, with Japanese stocks rising 0.5% and South Korean stocks slightly up after returning from holiday. The Singapore HS50 index, reflecting expectations for Hong Kong stocks, is currently at 24,255, up 329 points and 215 points above the spot Hang Seng Index, suggesting the Hang Seng Index may open about 200 points higher.
Overnight gains in Chinese ADRs and ADRs driven by improved AI sentiment are expected to bring some positive momentum to Hong Kong stocks. Yesterday, the Hang Seng Index firmly held above the key level of 23,800. Despite low turnover, the index eventually reclaimed 24,000, indicating some short-term support. Referring to the distribution of Hang Seng Index bull and bear warrants, yesterday's slight rebound attracted bulls to cover previous losses. Although the total number of outstanding bull warrants decreased by 987 corresponding futures contracts, the overall volume of lower-level street positions remains substantial, with the heavily concentrated zone of 23,600 to 23,699 still involving 1,336 corresponding futures contracts, suggesting related bull funds are still waiting for opportunities to squeeze shorts. In contrast, bearish warrant positions in nearer price zones increased faster, with the 24,500 to 24,599 range increasing by 826 corresponding futures contracts to 1,193. If the index continues to rebound, 24,500 is likely the first rebound target.
However, risks remain in the Hong Kong market. Standard Chartered yesterday issued its latest Hang Seng Index forecast, lowering its 12-month target from the previous 28,000 in August to 26,000-27,000, and downgrading its rating on Chinese equities from "overweight" to "core holding." It also warned that in a pessimistic scenario, the Hang Seng Index might fall to test 21,500 to 22,500. Standard Chartered explained that the downgrade in the Hang Seng Index target and Chinese equity rating is mainly due to uneven recovery in the mainland economy, and U.S. interest rate hikes will shift funds to regions with better returns. Despite low valuations in Chinese stocks, re-rating will still take time. (hc)