<JPM Research> Identifies HK Stocks as 'Beneficiaries of the Ongoing Oil Price Surge' (Table)

JP Morgan Report: JP Morgan identified resilient Hong Kong stocks benefiting from the current oil price rally, all rated as Overweight.

Stock Performance: The report includes stocks like PetroChina, China Hongqiao, Chalco, and Yankuang Energy, with varying short selling ratios and price targets.

Short Selling Data: The short selling data indicates significant activity, with PetroChina and China Hongqiao having the highest short selling amounts and ratios.

Oil Price Forecast: CICC predicts that Brent oil prices could exceed US$120 per barrel if disruptions in the Strait of Hormuz continue into the second quarter.

Market Performance: The HSI closed down 123 points (0.5%) at 25,593, with significant declines in major financial stocks like HSBC and Standard Chartered, while the total market turnover reached HKD126.059 billion.

Sector Movements: Oil stocks like PetroChina and CNOOC saw gains due to rising oil prices, while gold stocks and airlines experienced declines amid fluctuating market conditions.

Corporate Developments: Swire Group plans to raise HKD1.79 billion by selling a stake in Cathay Pacific, which saw a drop in its stock price, while Swire Pacific A's stock rose after announcing an increased dividend.

Tech Stock Trends: Major tech companies like Tencent and Alibaba saw slight increases, while others like Meituan and Kuaishou experienced minor declines, reflecting mixed performance in the tech sector.

CNOOC and PetroChina Performance: CNOOC and PetroChina have shown strong cash flow generation, with Goldman Sachs noting their improved CROCI rankings and projecting a top-tier free cash flow yield of around 10%.

Valuation Adjustments: Goldman Sachs raised the target prices for both CNOOC and PetroChina, with CNOOC's target price increasing from HKD21.1 to HKD31 and PetroChina's A shares target price rising from RMB11.8 to RMB15.3.

Cost Advantages: CNOOC is highlighted for its significant cost advantage, with a Brent breakeven point of approximately USD30 per barrel, while PetroChina benefits from strong upstream natural gas profits and potential cost savings.

Coverage Transition: Goldman Sachs has transferred coverage responsibility for major Chinese oil companies from Nikhil Bhandari to Amber Cai, with earnings forecasts for 2026 to 2027 being raised by an average of about 2%.

Market Opening: The Hong Kong bourse opened lower, with the HSI down 0.5% at 25,583, influenced by Iran's continued shutdown of the Strait of Hormuz.

Tech Sector Performance: Major tech stocks like TENCENT and BABA-W opened flat or slightly lower, while NTES-S saw a 1.9% increase.

Commodity Prices: Brent oil futures rose above USD100, with PETROCHINA and CNOOC opening higher, while gold prices dropped by 1% due to weakened expectations for interest rate cuts.

Company Earnings: OOIL reported a significant drop in net profit by 41%, leading to a 3.4% decline in its stock price, while POP MART's collaboration with Sanrio sold out quickly, impacting its stock negatively.

Market Performance: The HSI fell by 1.2% to 25,579 points, with significant losses in the HSCEI and HSTECH, while total market turnover reached HKD131.003 billion.

Sector Highlights: Oil stocks like PETROCHINA and CNOOC saw gains of 2.4% and 3.4%, respectively, while coal stocks also performed well, with YANKUANG ENERGY rising by 8.5%.

Inflation Impact: Inflation concerns negatively affected real estate and utility stocks, with major companies like HENDERSON LAND and SHK PPT experiencing declines of over 3%.

Tech Sector Trends: Major tech stocks such as TENCENT and BABA-W faced losses, with TENCENT dropping 1.1% and BABA-W falling 2.3%, while JD-SW managed a slight increase of 0.2%.

Market Opening Trends: Hong Kong stocks opened lower, with the HSI down 0.7%, HSCEI down 0.4%, and HSTECH down 0.6%. Notable oil stocks like PETROCHINA and CNOOC saw increases, while several tech stocks, including BABA-W and TENCENT, opened lower.

Sector Performance: In the tech sector, BABA-W opened 2% lower, while JD-SW opened 0.3% higher. Financial stocks showed mixed results, with HSBC HOLDINGS slightly up and AIA down 2%.

Short Selling Activity: Significant short selling was observed across various stocks, with BABA-W and MEITUAN-W experiencing high ratios. The short selling data indicates a cautious sentiment among investors.

Regulatory Investigation: The SFC and ICAC launched an investigation into GUOTAI JUNAN I, leading to a 4.2% drop in its stock price after detaining an employee.