The U.S. stock market remained strong in July. After several waves of takebacks, and even after the delta variant virus was diagnosed with a rise and plummeting, the three major indexes continued to simultaneously set new highs, marking the 500-index breaking through the 4,400-point mark, and reaching 4,411.80 at the time of writing. And the Dow, even more, closed above 35,000 points for the first time, raising the year-to-date return of the three major indexes to 14.56%-17.46%. Under turbulent market conditions, the balance of commercial banks deposited with the Federal Reserve is as high as US$17 trillion, which is 33% more than in 2019. It is still a strong support force in the short-term stock market. The strength of U.S. stocks in recent years has been mainly driven by the Federal Reserve and corporate repurchases. Till the end of June, U.S. companies have announced that the size of stock repurchases has reached 431 billion U.S. dollars, exceeding 40% in the same period in 2020. The record-breaking total repurchase scale for the year is a foregone conclusion. The U.S. Treasury yield of the current 10 years is only 1.3%, it is a "reasonable move" to repurchase stocks to increase its attractiveness to improve managers' performance. However, the most basic principle of repurchase should be only when the stock price is undervalued and sufficient cash. Can the current US stocks be regarded as undervalued? I'm afraid everyone has the answer in their minds.

Although the US economy has maintained its current growth rate, the problems of high inflation, excess funds, and the epidemic have never been resolved. The VIX index, which reflects panic sentiment, has continued its upward trend, and volatility has increased. It feels like the story of the wolf coming. Over time, the "lie" convinced the liar himself to be true, but in the end, it was an extremely painful lesson. Recently, many investment experts warned that U.S. stocks would collapse rapidly, and the "big market" was imminent, but they began to be treated as jokes. As far as the author is concerned, although the US economic growth is gradually slowing down and US stocks will inevitably collapse on the same day, it is inevitable to be arbitrary. However, at this stage, the volatility of US stocks can only "follow the flow", not the time of "buy and hold". The effective way is to get in and out with a speedy response.

The Hong Kong stock market's trend in July was horrible. The mainland government made repeated moves to affect the technology, education, and mainland real estate stocks. Under the storm of policy supervision, southbound continued to flow away. The Hang Seng Index fell more than 9.1% in a single month, and it fell sharply on the day of writing from 4.13% to 26,192.32, the state-owned enterprise index trend is even weaker, with a one-month return of -14% and a year-to-date -12.88%. It is the only major global stock index to record a negative return in the year. Du Fu’s "Dream of Li Bai" is very aptly used to describe the miserable state of the national index. Its valuation has remained low. However, it is implicated by external factors, which makes it difficult to express (but why does the mainland stock index does not have such a decline?). It's really hard to understand. In any case, unless there are key national policies that are favourable, the chances of a turnback within this year are not optimistic.

Under these market conditions, to fight for a rebound, one must choose stronger sectors such as the "shipping stocks, electric vehicle stocks and energy stocks" mentioned last month, plus new energy stocks as the top choice. Education stocks and Chinese property stocks have become weak in the medium term, and it is better to reduce the holding when the stock price rises. 

This month recommended that investors consider Xinte Energy (1799), the company is an upstream producer of silicon materials, while providing engineering construction contracting (ECC) services and solar and wind power plant operation (BOO) services. The company has announced its profit alert earlier. It expects a net profit of RMB 1.15 billion in the first half of this year, which is 660 times net profit for 2020. The low base is definitely due to the epidemic last year. The price of silicon materials has risen sharply this year, and the price per ton is three times higher than that in June last year. The company do earn a lot. Therefore, the company plans to invest 8.799 billion yuan to increase the annual output of polysilicon to 100,000 tons, part of which has been raised by issuing domestic shares. Entering the third quarter, although silicon material prices have softened, they remain high. With the current strong demand, it is expected to continue into the fourth quarter. It is expected that the company's net profit of this year return to the level of 2018. The current historical price-earnings ratio is a bit high (approximately 29.4 times), but with the support of future national policies, the short-term afternoon market is still expected to continue to rise.

As for Kangji Medical (9997), which was introduced last month, subject to market conditions following a decline. Strictly speaking, it was a failure. However, the stock price is still in the upper and lower range. If you are interested, you can wait for a long-term buy near $11 to hold it, otherwise, you can consider changing to another one. It is more suitable to choose the new special energy (1799) introduced this month to quickly regain the lost ground.

Kay Ho (CE No.: ANV293)

Acer King Capital Hong Kong Limited

Statement: The author is a licensee of the 1st, 4th, and 9th types of licenses of Securities and Futures Commission, SFC. Acer King securities Limited and Acer King Capital Hong Kong Limited are affiliated companies of Hantec Group and were invited to contribute articles in Hantec Group's monthly newsletter. The writing does not represent the position of Hantec Group. As the author does not personally hold the above-mentioned shares, investors should exercise caution when buying or selling relevant securities and investment instruments.