Daily Investment Strategy
Daily focus：China Mobile（941）
The medium and long-term capital entry plan announced by the central government yesterday will help state-owned insurance companies increase their A-share investments. We expect that dividends to shareholders will be more stable, and SOE related stocks with continuously growing dividends will benefit first, including China Mobile. China Mobile's financial advantage is its abundant free cash flow, which is due to the company's better control over capital expenditures and the expected faster collection of accounts receivable. Under this circumstance, the company can be more powerful in paying dividends to shareholders. In addition, the core businesses of the three major telecom operators in China are communication services and digital services. Considering The markets of both are only in China, the impact of the China-US struggle on telecom operators is the smallest. Target price is HK$80.9.
The medium- and long-term capital entry plan has further heated up the SOE related stocks
Yesterday, six departments in China jointly launched the "Implementation Plan on Promoting the Entry of Medium and Long-term Funds into the Market", which focuses on guiding state-owned insurance companies to fully implement a long-term assessment of their operating performance for more than three years, with the ROE assessment weighting no more than 30% in the current year. Tthe weight of three to five-year cycle indicators shall not be less than 60%. Considering that equity investments are generally more volatile than fixed income asset, extending the performance evaluation period will encourage insurance companies to hold more risky assets to increase their rate of return. In addition, the plan also mentioned steadily increasing the proportion of stock asset investments of the National Social Security Fund and guiding mutual funds to increase the scale and proportion of equity funds. We believe that in the short term, SOE related stocks will be heated.
On Wednesday, the Hong Kong Stock Connect saw a net inflow of 4.17 billion yuan, of which SMIC (0981) saw the largest net inflow of 870 million yuan, followed by Xiaomi Group (1810); Alibaba (9988) saw the largest net outflow of 110 million yuan, followed by Meituan(3690).
Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.
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