20180625-广发证券_香港_-Hong_Kong_Market_Strategy_2页_399kb

Hong Kong Market Strategy Summary

Core Content

This document outlines the potential impact of China's proposed personal income tax reform on the Hong Kong stock market, focusing on the consumer sector and related industries. The reform, which includes raising the tax threshold and introducing special deductions, is expected to enhance disposable income for middle- and low-income earners, thereby stimulating consumption and benefiting specific sectors.

Main Points and Key Insights

1. Tax Reform Overview

• Amendment Status: A proposal to reform the personal income tax system was submitted for the third review by the Standing Committee of the 13th NPC on June 19.
• Key Changes:
  • Implementation of a comprehensive income tax system covering salaries, service remuneration, contribution fees, and royalties.
  • Raising the monthly tax threshold from Rmb3,500 to Rmb5,000.
  • Introducing special deductions for children's education, continuing education, serious illness treatment, housing loan interest, and rent.
  • Optimizing the tax structure to widen the range of income subject to lower tax rates.

2. Market Strategy Recommendations

• Domestic Consumption Upgrade: Identified as a key medium-term theme, supported by the inflation cycle, consumption upgrades, and consumer borrowing policies.
• Sector-Specific Opportunities:
  • F&B: Companies offering products aligned with consumption upgrades are likely to benefit. Recommended stocks include Mengniu Dairy (2319 HK), H&H International (1112 HK), Yihai International (1579 HK), and China Resources Beer (291 HK).
  • Gaming: The reform is expected to boost disposable income, increasing both the number of visitors from second and third-tier cities and their average spending in Macau.
  • Auto: A higher tax threshold should improve the purchasing power of first-time car buyers in lower-tier cities, benefiting domestic automakers. Geely Auto (175 HK) is highlighted.
  • Sportswear and Education: Rising disposable income will support demand in these sectors. Recommended stocks include Xstep (1368 HK) and ANTA (2020 HK) for sportswear, and Maple Leaf Education (1317 HK) and Wisdom Education (6068 HK) for education.

3. Risks

• Slow Tax Reform Progress: Could delay the positive effects on the market.
• Stock Market Volatility: May affect investor sentiment and stock performance.
• Economic Slowdown in China: Might negatively impact the fundamentals of Hong Kong-listed companies.

Rating Definitions

• Company Ratings:

  • Buy: Expected to outperform the Hang Seng Index by more than 15%.
  • Accumulate: Expected to outperform by more than 5% but not more than 15%.
  • Hold: Expected relative performance between -5% and 5%.
  • Underperform: Expected to underperform by more than 5%.

• Sector Ratings:

  • Positive: Expected to outperform the Hang Seng Index by more than 10%.
  • Neutral: Expected relative performance between -10% and 10%.
  • Cautious: Expected to underperform by more than 10%.

Analyst Certification and Disclosure

• The research analysts confirm that the views expressed in the report reflect their personal opinions.
• No part of their compensation is tied to the specific recommendations in the report.
• GF Securities (Hong Kong) does not hold shares in the mentioned securities.
• No investment banking relationships with the listed companies in the past 12 months.
• Analysts and their associates do not serve as officers of the companies discussed and have no financial interests in the securities.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• It is intended solely for use by GF Securities (Hong Kong) clients.
• The information may be subject to change without notice.
• No liability is accepted for losses arising from the use of this report, unless excluded by law.
• Investments involve risks, and past performance does not guarantee future results.

Copyright

• This document is copyrighted by GF Securities (Hong Kong) Brokerage Limited.
• Unauthorized copying or redistribution is prohibited without prior written consent.