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<Research>Daiwa: HK Stocks See Slower Earnings Growth in 1H25; Upstream & TMT Sectors Robust, But Auto Sector Cools
Daiwa released a report on the H- and A-share markets, saying that it had noticed a dual earnings driver from their results for 1H25, still domestic demand remained inactive.For th...
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<Research>Daiwa: HK Stocks See Slower Earnings Growth in 1H25; Upstream & TMT Sectors Robust, But Auto Sector Cools
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Daiwa released a report on the H- and A-share markets, saying that it had noticed a dual earnings driver from their results for 1H25, still domestic demand remained inactive.

For the Hong Kong market, corporate revenue/ earnings growth slowed to -1.2%/ +3.9% in 1H25, compared to +1.9%/ +4.7% in 1H25. About 60% of Hong Kong-listed companies missed consensus analyst forecasts for 1H25, higher than the 26.7% seen in the A-share market.

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In addition, upstream sector turnaround and continued growth in TMT (technology, media, and telecom) were accelerating profit recovery in A-shares, while weak demand was weighing on consumer and Chinese bank earnings. The auto sector also experienced a nosedive in earnings amid a price war.

Benefiting from a low base in 1H24, more effective cost controls (cement and non-ferrous metals), falling raw material costs (steel), and product upgrades (steel), sectors such as materials (from steel to building materials) and paper realized solid earnings recovery in 1H25. Escalating gold and copper prices also shored up non-ferrous metal companies like ZIJIN MINING (02899.HK)  +1.560 (+5.847%)    Short selling $507.50M; Ratio 24.379%   .

Regarding internet platforms listed in Hong Kong, most of them delivered satisfactory results for 1H25, mainly driven by new business revenue growth ( KUAISHOU-W (01024.HK)  +3.050 (+4.363%)    Short selling $1.12B; Ratio 23.311%   and BABA-W (09988.HK)  +2.000 (+1.541%)    Short selling $3.57B; Ratio 21.402%   ).

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In contrast, the domestic demand sectors were still a drag. Overcapacity and soft domestic demand continued to drag down earnings growth in coal, real estate, and broad consumer (excluding home appliances) sectors.

Although banks managed to turn their losses to profits in 2Q25, their results were still constrained by sluggish credit growth and narrowing NIMs. It is also worth noting that the auto sector's earnings momentum cooled significantly in 2Q25 due to the price war.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-09-05 16:25.)

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