《Economic Information Daily, 7th exclusive》Overnight, although the yield of US 10-year Treasury bonds slightly retreated, it remained high. Wall Street's new wave of AI investment enthusiasm has not cooled down. Overnight, technology stocks and AI-related stocks generally rose, with both Nasdaq and S&P hitting new highs. On the last day of the National Day holiday, ahead of northbound funds resuming trading, Hong Kong stocks retreated first. Internet technology and biotech sectors fell even before northbound funds returned, dragging down the Hang Seng Index, which dropped 128 points or 0.5% in half a day, closing at 24,151. The Hang Seng China Enterprises Index stood at 8,075, down 53 points or 0.7%. The Hang Seng Tech Index was at 4,184, down 38 points or 0.9%.
Funds continue to focus on stock-picking rather than market-wide investment. Board turnover was nearly HK$51.8 billion, about HK$2 billion less than the extremely low trading volume during the same period the previous day (6th). Norman Chan of HKMA stated that if a significant interest rate differential between Hong Kong and the US persists, the linked exchange rate system's automatic interest rate adjustment mechanism would lead to weakening of the Hong Kong dollar. DBS Bank forecasts that the Hong Kong dollar could test the weak-side convertibility guarantee level of USD 1 to 7.85 as early as October.
*Mak Ka Ka: Bank and utility stocks remain relatively stable, indicating no systemic capital outflow risk in港股*
Despite strong AI investment sentiment in US stocks, Hong Kong stocks were not lifted by external market sentiment. Ahead of northbound funds' return, the market retreated first, with the Hang Seng Index dropping over 100 points in half a day, yet still holding above the psychological level of 24,000. Mak Ka Ka, Head of Financial Products Trading and Head of Research at Grand Fortune Securities (Asia), told Economic Information Daily that recent trading data clearly reflects that without northbound funds, trading volume and upward momentum in Hong Kong stocks are significantly insufficient. High US bond yields also limit the upward potential of Hong Kong stocks.
Mak Ka Ka expressed concern that persistently high US bond yields could have medium- to long-term impacts on Hong Kong stocks. She explained that the market now generally expects US Treasury yields to remain high through year-end. High bond yields would lead to greater valuation discounts for high-beta stocks such as tech and biotech stocks. As a result, funds would rather flow into the bond market for guaranteed returns, weakening the appeal of Hong Kong stocks.
October marks the beginning of Q4, but the dismal trading volume in Hong Kong stocks recently has raised concerns about the market's performance this quarter. Mak Ka Ka analyzed that although trading volume is currently low, there has been no panic-driven plunge in the Hang Seng Index. Overall performance remains mixed with gains and losses. Therefore, based on known factors and performance, there are no signs yet of a major market downturn. She pointed out that recent fund volatility has mainly occurred within tech and biotech stocks, while low-beta sectors such as bank and utility stocks have not seen large-scale capital outflows, suggesting that Hong Kong stocks have not yet entered a systemic capital outflow crisis. She noted that financial stocks such as HSBC (00005) and Standard Chartered (02888) faced heavy selling pressure earlier due to news of Britain's proposed windfall tax, but these stocks have since stabilized, supporting the above assessment. Therefore, aside from the volatility in tech and biotech stocks, it is advisable to closely monitor the performance of low-beta stocks to gauge future fund flows.
*Genscript's fair value is HK$30; current price already "over-optimistic" and pre-reflecting expectations*
Before northbound funds returned, major biotech stocks collectively retreated. Hot stock Genscript (01548) plunged 13% in half a day, leading the sector decline, with turnover exceeding HK$800 million, making it the most actively traded stock in the sector. Recently, Genscript was driven by multiple positive news, including strong earnings from its subsidiary Legend Biotech, collaboration with Eli Lilly's AI drug discovery lab, and speculation over its advisory role in a Nobel Prize-winning company in medicine, pushing its share price up by over 1.7 times in just over two months. Mak Ka Ka admitted that the market has already priced in "super optimistic" scenarios for Genscript's development in areas such as AIDD, making the current price indeed expensive. She explained with data that based on Genscript's stakes in its subsidiaries including Legend Biotech, Bio-prosperous, and Biosynergy, and considering various potential factors, Genscript's discounted equity value is approximately HK$30, with a most optimistic scenario at HK$47 and a most pessimistic at HK$20. Genscript's current price of around HK$42 still represents a premium of about 40% over its base valuation, indicating the market has already assigned an extremely high premium.
Mak Ka Ka noted that due to the high-beta nature of the biotech sector, if funds exit this sector, Genscript would face greater downside pressure than its peers. Therefore, even if the price falls below the 10-day moving average (around HK$43.4), it is still not suitable to buy now. She indicated that HK$30 would be a more reasonable valuation level. However, given the aforementioned external bond market risks that increase valuation discounts for biotech stocks, even if the stock price drops to HK$30, its medium- to long-term risk appetite remains not high. She does not recommend aggressive investment unless there is a significant improvement in the company's fundamentals. (hc)
Funds continue to focus on stock-picking rather than market-wide investment. Board turnover was nearly HK$51.8 billion, about HK$2 billion less than the extremely low trading volume during the same period the previous day (6th). Norman Chan of HKMA stated that if a significant interest rate differential between Hong Kong and the US persists, the linked exchange rate system's automatic interest rate adjustment mechanism would lead to weakening of the Hong Kong dollar. DBS Bank forecasts that the Hong Kong dollar could test the weak-side convertibility guarantee level of USD 1 to 7.85 as early as October.
*Mak Ka Ka: Bank and utility stocks remain relatively stable, indicating no systemic capital outflow risk in港股*
Despite strong AI investment sentiment in US stocks, Hong Kong stocks were not lifted by external market sentiment. Ahead of northbound funds' return, the market retreated first, with the Hang Seng Index dropping over 100 points in half a day, yet still holding above the psychological level of 24,000. Mak Ka Ka, Head of Financial Products Trading and Head of Research at Grand Fortune Securities (Asia), told Economic Information Daily that recent trading data clearly reflects that without northbound funds, trading volume and upward momentum in Hong Kong stocks are significantly insufficient. High US bond yields also limit the upward potential of Hong Kong stocks.
Mak Ka Ka expressed concern that persistently high US bond yields could have medium- to long-term impacts on Hong Kong stocks. She explained that the market now generally expects US Treasury yields to remain high through year-end. High bond yields would lead to greater valuation discounts for high-beta stocks such as tech and biotech stocks. As a result, funds would rather flow into the bond market for guaranteed returns, weakening the appeal of Hong Kong stocks.
October marks the beginning of Q4, but the dismal trading volume in Hong Kong stocks recently has raised concerns about the market's performance this quarter. Mak Ka Ka analyzed that although trading volume is currently low, there has been no panic-driven plunge in the Hang Seng Index. Overall performance remains mixed with gains and losses. Therefore, based on known factors and performance, there are no signs yet of a major market downturn. She pointed out that recent fund volatility has mainly occurred within tech and biotech stocks, while low-beta sectors such as bank and utility stocks have not seen large-scale capital outflows, suggesting that Hong Kong stocks have not yet entered a systemic capital outflow crisis. She noted that financial stocks such as HSBC (00005) and Standard Chartered (02888) faced heavy selling pressure earlier due to news of Britain's proposed windfall tax, but these stocks have since stabilized, supporting the above assessment. Therefore, aside from the volatility in tech and biotech stocks, it is advisable to closely monitor the performance of low-beta stocks to gauge future fund flows.
*Genscript's fair value is HK$30; current price already "over-optimistic" and pre-reflecting expectations*
Before northbound funds returned, major biotech stocks collectively retreated. Hot stock Genscript (01548) plunged 13% in half a day, leading the sector decline, with turnover exceeding HK$800 million, making it the most actively traded stock in the sector. Recently, Genscript was driven by multiple positive news, including strong earnings from its subsidiary Legend Biotech, collaboration with Eli Lilly's AI drug discovery lab, and speculation over its advisory role in a Nobel Prize-winning company in medicine, pushing its share price up by over 1.7 times in just over two months. Mak Ka Ka admitted that the market has already priced in "super optimistic" scenarios for Genscript's development in areas such as AIDD, making the current price indeed expensive. She explained with data that based on Genscript's stakes in its subsidiaries including Legend Biotech, Bio-prosperous, and Biosynergy, and considering various potential factors, Genscript's discounted equity value is approximately HK$30, with a most optimistic scenario at HK$47 and a most pessimistic at HK$20. Genscript's current price of around HK$42 still represents a premium of about 40% over its base valuation, indicating the market has already assigned an extremely high premium.
Mak Ka Ka noted that due to the high-beta nature of the biotech sector, if funds exit this sector, Genscript would face greater downside pressure than its peers. Therefore, even if the price falls below the 10-day moving average (around HK$43.4), it is still not suitable to buy now. She indicated that HK$30 would be a more reasonable valuation level. However, given the aforementioned external bond market risks that increase valuation discounts for biotech stocks, even if the stock price drops to HK$30, its medium- to long-term risk appetite remains not high. She does not recommend aggressive investment unless there is a significant improvement in the company's fundamentals. (hc)
