Geopolitical conflicts do not change the medium-term market trend

  Geopolitical risk or risk appetite in the global market has a sustained impact on the Russian-Ukrainian conflict to further spread the actual magnitude of the disturbance of the market or continued volatility, but from the historical geopolitical conflict events, a small-scale geopolitical conflict will not change the medium-term trend of the stock market in the United States. Based on this logic, Hong Kong stocks short-term or geo-conflict by a small adjustment, but the medium-term trend is still determined by the general pattern, low valuation advantage, the fall is often the “golden pit.
  Short-term market adjustment or mainly from the background of short-term fundamental weakness, the peripheral environment fluctuations and the market on the “new round of regulation” due to excessive concern. In addition to the recent geopolitical conflict, the international market appeared short-term risk aversion, the market has a certain overshoot reaction, but in the relative clarity of the situation, some high-quality stocks rebounded significantly, panic can be released, proving that the market for high-quality assets are still long-term optimism.
  From the perspective of the general policy environment, more biased towards the implementation of regulatory requirements, encouraging innovation and empowering the economy, is expected to gradually stabilize the marginal impact as the rules continue to fall into place. Fundamentals are affected by the macro environment in the short term, and growth momentum is expected to recover quarter by quarter starting in the second quarter of 2022, with significant valuation discounts for vertical/horizontal comparisons. Overall, the risk-reward ratio of Chinese Internet technology companies has become attractive.
  In terms of the Hong Kong stock market, prudent investors can focus on the economic volatility in the background, revenue and profits have a high degree of certainty of the subject, looking for “into the attack, can retreat” investment logic.
HKEx: strong performance certainty

  HKEx (0388.HK) previously released 2021 results, there are several key points to grasp.
  First, it achieved revenue and other income of HK$20.95 billion, +9.2% year-on-year; net profit attributable to the mother company of HK$12.535 billion, +9.0% year-on-year. The growth was mainly due to the record high spot market trading volume, and the southbound and northbound trading volume of the Shanghai-Shenzhen-Hong Kong Stock Connect. Second, revenue and other income of HK$4.7 billion was achieved in the fourth quarter of 2021, -7.2% YoY and -10.9% YoY; net profit attributable to the mother of HK$2.7 billion, -8.6% YoY and -17.8% YoY. The YoY decline was mainly due to lower trading volume in the fourth quarter. Third, the full-year dividend payout of $8.87 per share, maintaining a dividend payout ratio of 90%.
  Looking specifically at the breakdown data: spot market average daily trading volume increased significantly, and spot segment revenue rose sharply – spot segment achieved revenue of HK$6.13 billion in 2021, +22.8% YoY, accounting for 29% of revenue. The average daily trading volume of spot market rose 29% year-on-year to HK$166.7 billion. Both the northbound and southbound trading volume of Shanghai-Shenzhen-Hong Kong Stock Exchange hit record highs in the same period. The average daily trading volume of northbound trading was RMB120.1 billion, +32% year-on-year; the average daily trading volume of southbound trading was HKD41.7 billion, +71% year-on-year. Bond Connect trading was robust, with an average daily trading volume of RMB26.6 billion in 2021, +34% year-on-year. 98 IPOs were issued on the SEHK, down 56 year-on-year.
  The number of derivative warrants and CBBCs traded, and the number of newly listed derivative warrants and CBBCs on the SEHK reached record highs due to the launch of MSCI China A50 Index futures in October. 2021 Equity Securities and Financial Derivatives segment revenue of HK$3.4 billion, +6% year-on-year. The average daily turnover of derivative warrants, CBBCs and warrants on the SEHK was +8% YoY, the average daily contract count of stock options on the HKFE was +21% YoY to a record high, and the average daily contract count of derivatives on the HKFE was -12% YoY. The number of newly listed derivative warrants increased by 38% YoY and the number of newly listed CBBCs was +13% YoY, both record highs. 11,558 contracts were traded on average daily since the launch of MSCI China A50 Connected Index futures and 31,710 contracts were open at year-end.
  Commodities segment: Realized revenue of HK$1.48 billion in 2021, +1.7% YoY. Due to global economic uncertainty and the New Crown epidemic, the average daily volume of LME fee-traded metal contracts was -4% year-on-year and transaction fees were -2% year-on-year.
  In addition, spot market settlement fees rose and net margin investment returns fell sharply. 2021 settlement revenue of HK$8.0 billion, +4.7% YoY. The increase in revenue was mainly due to a significant increase in spot market settlement fees as a result of an increase in the number of transactions and record high revenue from northbound trading fees for the Shanghai-Hong Kong-Shenzhen Stock Connect. Net investment income -57% was mainly due to lower investment returns in the low interest rate environment, partially offset by higher average margin and clearing house fund amounts. The average daily amount of northbound trade settlement instructions was +54% year-over-year, and the value of the northbound-southbound portfolio was at a record high, up 18% and 7% year-over-year, respectively.
HELLENSE: Focus on beer retail business

  Helenus (9869.HK) is more suitable for investors who seek high growth and are not afraid of short-term market volatility. From the growth aspect, Hailens is characterized by “scale advantage + brand advantage + technology advantage” to build core competitiveness. Previously, most brokerage firms expected the company to open 2,660 stores, and there is still more than 3 times of store opening space, but affected by the epidemic, this expectation is afraid to have more preparation in time.
  From the performance forecast, the company expects 2021 revenue of 1.83-1.85 billion yuan, +124%-127% year-on-year, and expects a net loss of 210-230 million yuan, compared with a net profit of 70.07 million yuan in the same period last year and an adjusted net profit of 91-110 million yuan, +10%-46% year-on-year.
  The main reasons affecting net profit include: 1) change in fair value of convertible preferred shares of approximately $198 million; 2) equity-settled share-based payments of approximately RMB 92 million arising from the issuance of shares; and 3) listing expenses of RMB 31 million. As of the end of 2021, the number of the Company’s pubs increased to 782 from 351 at the end of 2020 and currently increased to 821.
  It should also be noted that the Company performed well during the Chinese New Year period. from New Year’s Eve to the sixth day of the Chinese New Year in 2022, the average daily revenue of all operating stores (570 stores, including more than 30 new stores opened in January 2022) was 104% of that of the Chinese New Year period in 2019 (the number of operating stores during the Chinese New Year period in 2022 was approximately eight times that of the Chinese New Year period in 19); it was nearly 80% of that of the Chinese New Year period in 2021 (the The number of stores in operation during the Spring Festival of 2022 is approximately twice the number of stores in operation during the Spring Festival of 2021).
  If based on the consideration of medium-term holdings, we should focus on the company’s scale advantage + brand advantage, which constructs the core competitiveness of Hailun Division. (1) scale advantage: the company has a large number of stores, consumes more alcohol, can get cheaper alcohol from the brand, and own alcoholic beverages accounted for 59% of the gross margin of 82%, so it can maintain the ultimate cost performance while maintaining high gross margins. And the bargaining power of the upstream is strengthened after rapid expansion, maintaining the maximum discount and low customer acquisition costs. (2) Brand advantage: Hailunji is mainly based on old customers bringing new customers, with high repurchase rate and strong stickiness of old customers, and the more stores it has, the more consumers it can cover, further enhancing its brand power.
  In the international market, the price of commodities is still the most important factor affecting the financial markets.
  At a ministerial meeting of member countries held by the International Energy Agency on March 1, countries agreed to jointly release 60 million barrels of crude oil. However, under the nervousness of the market, oil prices broke out upward after a brief retreat after the announcement. According to the news, half of the 60 million barrels of crude oil will come from the U.S. strategic oil reserves, and the rest of the countries will share the remaining part. Japan similarly said that IEA members have agreed to release further crude oil reserves if needed.
  With high oil prices and inflation becoming Biden’s most difficult domestic issues, the Biden administration has previously conducted a dumping operation, and the issue has become more urgent as the midterm elections are coming into view. This is not the first time that crude oil futures prices have risen rather than fallen after the announcement of the storage dump. The reason for this is that although 50 or 60 million barrels of crude oil may seem like a lot, the IEA’s release of reserves is only roughly enough for the US to use itself for about 3 days, in reference to the US consumption of close to 20 million barrels per day.

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