Today is April 30, which is a very critical trading day for those stocks whose status in Hong Kong Stock Connect is in jeopardy.
As we all know, the Hang Seng Composite Index is regularly adjusted every six months, with the data cut-off point in June and the end of December respectively, and the effective months in September and March, respectively. For the next Hang Seng Index semi-annual review, the time period examined is the market performance for the 12 months from July 1, 2023 to June 30, 2024.
The adjustment rules of the Hong Kong Stock Connect are "strict in and wide out". Under what circumstances will the existing Hong Kong Stock Connect be excluded? Generally, there are two situations: first, the constituent stocks of the Hang Seng Large and Mid-Cap Index change, resulting in the stock no longer meeting the inclusion criteria; The second is the Hang Seng small cap, which will be transferred out according to the average market value of less than HK $4 billion at the end of the previous 12 months.
The exact rule description is as follows:
The second scenario is more common, which makes some small-cap companies pull up the stock price in the last few days of the month during the inspection period in order to maintain the qualification of Hong Kong Stock Connect, and pull up the market value at the end of the month.
Now it's the end of the month, and there are only two months left in the adjustment inspection period. Isn't it time for some companies to be in a hurry?
According to the rules of the inspection, assuming that the stock prices of these Hong Kong Stock Connect targets do not change today, and the closing market value of yesterday is intended to be the closing market value at the end of April, we have counted the average market value of the past 10 months during the review period, and take the average market value of 4 billion at the end of the month during the review period as the red line, estimating that in order to maintain the status of Hong Kong Stock Connect, the passing requirements of the average market value of some small-capitalization enterprises at the end of the next two months, as well as the corresponding stock price increase that must be achieved corresponding to yesterday's closing price—— In other words, if their stock prices do not rise today, in order to meet the status of Hong Kong Stock Connect, they will need to achieve the "upward pressure value of stock prices at the end of the next month".
(Source: Wind)
Among the 28 targets with an average market value at the end of the month (less than 4 billion) in the above table, we do not consider the real estate stocks that have been lying flat for a long time for the time being, and we can see that the top 10 stocks with the greatest momentum of "Baotong" are: Sirnaomics (02257), Youlian International Education Leasing (01563), Dingdang Health (09886), EC Healthcare (02138), Mace Health (02415), Tongdao Liepin (06100), Yidianyun (02416), Xiabu Xiabu ( 00520), COSMOPOL INT'L (00120), Zhiyun Health (09955).
Some companies have seen a significant deterioration in their fundamentals. For example, Sirnaomics' cash flow is tight, and the company's cash and cash equivalents have decreased significantly from US$105 million in 2022 to US$23.884 million in 2023, and based on the company's net loss of US$84.99 million in 2023, the cash on the books is currently only enough for Sirnaomics to burn until the first quarter of 2024. COSMOPOL INT'L (00120) turned into a loss.
There are also some companies with better fundamentals. Zhiyun Health (09955)'s 2023 financial report shows that the company's operating income reached 3.69 billion yuan last year, a year-on-year increase of 23.5%. Among them, the revenue of hospital solutions was 2.87 billion yuan, accounting for more than 70%, which was the largest source of revenue, with a year-on-year increase of 31.5%. Non-IFRS adjusted net loss narrowed to 75.1 million yuan, down 77.4% year-on-year. The fourth quarter became the company's first profitable quarter, turning losses into profits in a single quarter. Yidianyun(02416) Q1 adjusted net profit increased by more than 50% year-on-year, and AI may drive the rapid growth of performance indicators; Dingdang Health (09886) had revenue of RMB 4.857 billion last year, an increase of 12.2% year-on-year; the adjusted net loss attributable to owners of the company was 107 million yuan, a year-on-year decrease of 17.2%; Mace Health (02415) annual performance turned into a profit and so on.
It is worth paying attention to those targets that are more active in daily transactions, have more abundant cash flow, and continue to repurchase.
For example, Xiabu Xiabu (00520), revenue in 2023 will increase by 25.3% year-on-year, the company's cash and cash equivalents at the end of the annual report period will be 129 million yuan, and the balance of the company's financial products invested with part of the cash on December 31 will be 654 million yuan, and the cash flow will maintain a stable trend for many years.
For another example, Tongdao Liepin (06100) cancelled 7,064,600 repurchased shares on April 22.
Pudat Technology (00650) is a relatively popular semiconductor stock, and has the concept of "domestic substitution". It announced in mid-January that since April 1, 2023, the company has obtained 83 purchase orders and prototype orders for semiconductor wafer cleaning, solar cell wet processing and solar cell copper plating equipment from different customers, an increase of 22 equipment orders from the company's announcement dated September 12, 2023.
CMGE (00302) is a high-quality target in the mobile game sector, and it is also a scarce target in the field of AI games. On April 29, the official website of CMGE announced that the phenomenal national IP "Breaking the Sky: Peak Showdown", a phenomenal national IP authorized by China Literature Group, published by CMGE, and developed by Shenzhen Yifan, officially announced today that it will be launched on all platforms on June 7. According to the disclosure, since the launch of the reservation for "Breaking the Sky: Peak Showdown", the number of reservations on the whole platform has exceeded 6 million.
For these Hang Seng small-cap stocks, as long as they focus on the stock price at the end of the month and change the stock price trajectory for a few days, they can maintain the status of Hong Kong Stock Connect at a relatively small cost. This may provide investors with short-term profit margins.
In addition, there are 14 targets (as shown in the table below), and the average market value of the month-end closing for 9 months from July 2023 to March 2024 is in the range of 40-5 billion, which basically meets the requirements of "Baotong", but the current latest market value is still far from 4 billion. Their status in Hong Kong Stock Connect is also in jeopardy, and companies with good fundamentals may also have short-term opportunities to make profits.
(Hong Kong Stock Connect targets with an average market capitalization of 4 billion to 5 billion at the end of the past 9 months)
If there is a sharp rise today, it may mean that the company's willingness to "Baotong" is very strong, so it is worth paying more attention to.