Zhitong Hong Kong Stock Exchange Unravels | Don't be afraid to step up and take the initiative, Sino-European cooperation opens up new space

[Anatomy Dashboard]

Against the backdrop of the continued decline in US stocks, the Chinese stock market showed strong determination and ability this time. A-shares took the lead in fighting back. Hong Kong stocks were also encouraged. At the end of the market, they also tenaciously strengthened their popularity. The Hang Seng Index closed up 0.68%.

The US imposed a further 50% tariff on China as scheduled, and it officially came into effect at 12 noon Beijing time. This was also a time of relative sluggishness throughout the day. However, after that, the market was stimulated by various favorable factors, and both markets stabilized their positions. The strengthening of the stock market is the strongest response to the increase in US tariffs, and it has directly taken the initiative. Otherwise, according to Trump's consistent style of painting, it's like this: look, as soon as I step up, the other party won't be able to handle the sharp drop in the stock market; they will definitely have to discuss it with us. Now, the ball is kicking back, and I'm not afraid at all. How can this be fixed? There's no trick behind the key; you can't add 100% again; that's a joke. On the evening of April 9, CCTV reported that with the approval of the State Council, the additional tariff measures on imported goods originating in the United States will be adjusted from 34% to 84% starting at 12:01 on April 10, 2025.

The reason why the stock market is not particularly alarmed about this tariff war is that we already have an adequate response, made preparations long in advance, and did not come up with a temporary idea. Unlike countries such as Japan and Vietnam, they thought they were loyal enough to the US and should not be ruthless, including Europe, all of them were baffled. Without forward-looking thinking and not planning ahead, it is inevitable that Japan will spend money on helicopters. Europe has also been forced into a corner. If you think about the last time the US and Russia negotiated, Europe couldn't even get to the negotiation table, which is sad enough. The European Union, which was originally on an equal footing with the US, was cut into a second-class world by the US after only a few years of hard work. If you don't wake up and don't resist, then there's no cure.

It's not too late to fix the dead. According to Xinhua News Agency, Premier Li Qiang of the State Council spoke on the phone with European Commission President von der Leyen on the afternoon of April 8. This year's macroeconomic policy has taken full account of various uncertainties, and China is fully able to hedge against adverse external influences. Von der Leyen said that the EU has always attached great importance to its relationship with China. In the current situation, it is essential to maintain continuity and stability in the EU-China relationship. The European side is looking forward to holding a new EU-China leaders' meeting in due course to summarize the past, look forward to the future, and jointly celebrate the 50th anniversary of the establishment of diplomatic relations between Europe and China. The call conveyed two meanings. If the Chinese side has given it its will, we are not afraid at all, we are confident of winning, and don't panic. Von der Leyen also understood the situation and needed to actively move closer. Furthermore, the Spanish Prime Minister's visit to China tomorrow is also very significant. With the first crab eater, others will arrive one after another. Cooperation between China and Europe is also an important stabilizer for the world. The so-called North America is not bright and the West is not bright. It also gave a strong shot to the market.

The domestic side has made full preparations. Compared with entering the market with a bunch of various funds yesterday, the foundation was consolidated. There will be no repetition here. Today, confidence continues to be boosted. The Central Neighborhood Work Conference was held in Beijing from April 8 to 9. The conference emphasized that to build a community of neighboring destiny, it is necessary to consolidate strategic mutual trust with neighboring countries, support countries in the region to stabilize their own development path, and properly manage contradictions and differences; deepen development integration, build a high-level connectivity network, and strengthen industrial chain supply chain cooperation; jointly maintain regional stability, carry out security and law enforcement cooperation to address various risks and challenges; expand exchanges and facilitate personnel exchanges. The essence of this conference is what was mentioned above. One country is not bright; we are actively exploring other directions. This is also about telling the world that others use barriers to protect trade; we continue to expand our openness; others engage in fraud and bullying; and we are becoming prosperous together. The game of great powers does not rely on power or force. Although we already have this kind of strength, we still follow the rule of law, not overbearing. For example, at the United Nations General Assembly, the US representative once again “routinely” slandered China for supplying weapons to Russia. China's representative Geng Shuang directly objected. He said: Frankly speaking, if China actually provided military supplies to Russia, then the battlefield situation would not be what it is today. The whole place was silent. No one dared to refute it. This is strength and ambition.

Also, there are positive rumors today: there will be a joint press conference at 5 or 9 o'clock this week. It involves real estate, finance, and consumption. It can be seen that China will have many more tools to hedge in the future. So, for comparison, Trump is already making such a big deal out of domestic complaints, not to mention ordinary people. In the case of Trump's cabinet, the interior has become a mess. Musk furiously spurred trade advisors “dumber than bricks,” and Navarro replied: Can you build a car too? As a businessman, Musk has deeply felt the negative impact of the tariff war, and his stock price has already surpassed its decline from a high point. Apple estimates are even worse, because the vast majority of products are made in China, and some in India, Vietnam, etc., all in heavy duty zones. As a result, they have to temporarily hire airplanes to quickly bring goods back to the US, and sell those that can be sold as soon as possible; don't let the prices rise and no one buys them. If you don't increase the price, you just have to lose money. In this situation, there is almost no solution, unless the tariffs are withdrawn. If you want to talk about US stocks, is there a way back to heaven? I hope the Federal Reserve will cut interest rates. I feel like they are thinking too much. When tariffs are raised, inflation will inevitably rise, and they will dare to cut interest rates. Well, inflation is even more fierce; the US dollar will almost be scrapped. What's more, it has recently been rumored that both China and Japan are throwing off US debt, causing their yield to jump 5%. If they want to issue new bonds, they can only have higher interest rates; it is basically impossible to pay back the debt. In the end, it was a script that went to the Haihu Manor Agreement? It feels a bit similar; I'm afraid to imagine.

Going a bit further, back to the market. Anyway, this is already a fact; we can only face it positively. Today, the market has taken several main routes. The first one is to stimulate domestic demand. The State Administration of Taxation issued a notice on April 8 to promote the “buy and refund” service for overseas travelers nationwide starting the same day. The policy has greatly enhanced the convenience of tax refunds, stimulated the willingness of overseas travelers to spend, and encouraged more travelers to immediately spend and shop again at duty-free shops. As a leading domestic duty-free company, China Free has duty-free shops in many parts of the country. The implementation of the policy is expected to increase customer unit prices and repurchase rates at its core stores, driving sales growth. The company announced that the wholly-owned subsidiary China Free International signed a “Strategic Cooperation Agreement” with Beijing Tongrentang Sinopharm. The two sides will cooperate on the global dissemination of traditional Chinese medicine culture, focusing on expanding the “Belt and Road” countries and Southeast Asian markets. Unexpectedly, the suspension did not rise for a thousand years. Instead, it was activated at this time. Today, it surged by more than 23%. Another beneficiary travel category, Tongcheng Travel (00780) in April, also rose nearly 8% in April. Also, as repeatedly mentioned, Jinxin Reproduction (01951), which stimulates fertility, rose by more than 6%, and China Feihe (06186), which uses milk powder, rose more than 11%.

The second is autonomy and control. The process of replacing domestic semiconductors is accelerating, and the localization rate is expected to increase further. Shanghai Fudan (01385) and SMIC (00981) have both increased by more than 10%.

Finally, there is the military industry. Sino-US relations have deteriorated. For the time being, a heated war is unlikely, but now the world is in turmoil, and it is necessary to increase military investment. For example, in the direction of maritime power, future demand will continue to rise. Not only will it maintain our normal trade, but at the same time, it is also an important consideration for the safety and security of countries around the world. As a result, China Shipbuilding Defense (00317) surged nearly 16%, and China Aviation Technology (02357) also surged more than 8%.

Hong Kong stock companies are actively protecting the market. From April 7 to 8 alone, 77 Hong Kong stock companies have initiated repurchases, with a total repurchase amount of about HK$1,435 billion. Among them, 16 companies repurchased more than HK$10 million. For example, Mingchuang Premium (09896) bought back HK$52.4073 million in a single day on April 7, and Ruisheng Technology (02018) bought back HK$40.1796 million in a single day on April 7. There are also varieties that were repurchased for the first time during the year. In the past two days, companies such as Suteng Juchuang (02498) and Anton Oilfield Service (03337) have repurchased for the first time during the year.

Next, with China getting closer to counteracting, let's take a look at how US stocks are trending tonight, and see what other cards the US can play. Anyways, we've taken the lead.

[Section Focus]

The Spanish Prime Minister will visit China tomorrow to “find new opportunities”. The two sides will promote a cooperation agreement in the field of cosmetics

Western media mentioned that Sanchez's current visit to China coincides with the 20th anniversary of the establishment of a comprehensive strategic partnership between the two countries, which is a major reason why the two sides arranged this visit. At the same time, the commercial implications of this visit are quite obvious. According to Spain's “Rational” newspaper, Sanchez hopes to promote cooperation agreements in the cosmetics field through this trip to enhance the influence of Spanish brands in the Asian market.

The United States has many well-known cosmetics companies, such as Estée Lauder, Cosmos, etc., and most of the beauty brands under these companies have already entered the Chinese market and have occupied an important position in the Chinese market for a long time. The ongoing trade war between China and the US will also have a certain impact on the development of these brands in China. Domestic cosmetics are expected to cooperate more widely with Europe, and the share of domestic cosmetics is expected to increase.

The main varieties of Hong Kong stocks: Mao Geping (01318), Giant Biotech (02367), and Shangmei Shares (02145).

[Individual Stock Mining]

China Resources Drinks (02460): Continued increase in profitability and increase in the proportion of own production capacity

China Resources Drinks achieved steady development. In its first financial report after listing, 2024 had revenue of 13.521 billion yuan and net profit of 1,661 billion yuan, an increase of 24.7% over the previous year; in 2024, it plans to pay an annual dividend of 0.307 yuan per share and a special dividend of 0.176 yuan for the 40th anniversary of its establishment, with a total dividend rate of 70.8%.

Comment: It is expected that various policies to expand domestic demand will continue to be implemented to promote a stable, moderate and positive overall economy. The company's profitability continues to improve, and net profit far exceeds revenue growth. The growth comes from a breakthrough increase in gross margin. It increased from 44.7% in 2023 to 47.3%, which strongly drove the net profit margin to rise from 9.9% in 2023 to 12.3% in 2024. China Resources Drink's products mainly include brands such as “Yibao”, “Benyu”, “Supreme Clean”, “Honey Series”, and “Holiday Series”. The Group has created a series of market product portfolios, which are mainly divided into two categories: packaged drinking water products and beverage products. By product, in 2024, China Resources Drinks' packaged drinking water products achieved revenue of 12.124 billion yuan, accounting for 89.7% of total revenue; of these, revenue from small-sized bottled aquatic products was 7.028 billion yuan, accounting for 52% of revenue; revenue from medium to large bottled aquatic products was 4.6 billion yuan, accounting for 34.1%. As the “second growth curve” of China Resources Drinks, beverage products achieved revenue of 1,397 billion yuan, an increase of 30.8% over the previous year, accounting for 10.3% of total revenue. The proportion of own production capacity increased: The production ratio of own factories increased from 36% in 2023 to more than 50% in 2024, and 22 new production lines were added, reducing dependency on OEM and reducing manufacturing costs significantly. China Resources Drinks said its own production capacity will increase to 60% by 2025.

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