HK May Overall Consumer Prices Rise 1.2% YoY

The Hong Kong Census and Statistics Department (C&SD) published the May Consumer Price Index (CPI). Overall CPI rose 1.2% YoY in May, up 0.1ppt from 1.1% in April. Excluding the impacts of one-off relief government measures, the Composite CPI rose by 1.0% YoY, compared to 0.9% in April. The respective increases in the CPI(A), CPI(B) and CPI(C) were 1.2%、1.1% and 1.2%. In terms of categories, alcohol and tobacco recorded the biggest jump, up 20.1% YoY, which was the main reason for the increase in May. Price of electricity, gas and water decreased by 10.9% YoY. The YoY decline in durable goods prices stood at 0.9%. Clothing, dining out and takeaways, transportation, miscellaneous services and goods all increased.

The underlying consumer price inflation remained modest in May. Prices of meals out and takeaway food continued to increase at a relatively fast pace over a year earlier, while those of basic food were virtually unchanged. Prices of energy-related items decreased markedly further. Price pressures on other major components remained broadly in check. Looking ahead, overall inflation should stay contained in the near term. Domestic cost pressures may increase as the Hong Kong economy continues to grow. External price pressures should continue to stay on a broad moderating trend. In terms of the Hong Kong stock market, the Hang Seng Index may lack upward momentum in the near term. It is expected to fluctuate between 18,000-19,200 points.

In terms of industry, many game companies are actively preparing for the summer peak season. Many games are expected to be launched in H2, which will help improve the prospects of the industry.

XD Inc. (2400.HK) newly launched a self-developed idle game “GoGo Muffin”, which has performed well. GoGo Muffin has launched in the Hong Kong, Macao and Taiwan markets in January 2024, and in the mainland Chinese market in May. GoGo Muffin entered the top 10 of the domestic best-selling list in the first week after release. As of May 28, the product reached its highest ranking of fourth on the best-selling list, just behind ” Dungeon & Fighter: Origins”, “Honor of Kings” and “Peacekeeper Elite”. GoGo Muffin required a TapTap account for login, so the growth of the game is expected to drive the growth of platform users.

Revenue in FY23 amounted to RMB 3.39 billion, a YoY decrease of 1%. Of which, the revenue of TapTap platform increased by 32.6% YoY to RMB 1.3 billion, mainly due to the improvements of advertising system and client coverage, and the increase of non-advertising revenue such as cloud play. Game business revenue decreased by 14.7% YoY to RMB 2.1 billion. Net loss came in at RMB 83 million, compared to a loss of RMB 553.5 million in FY22. It is recommended to buy at HK$19.50, target at HK$22.00, and stop loss at HK$18.00.

Kingsoft(3888.HK)’s revenue in 1Q24 increased 8% YoY to RMB2.1 billion. Gross profit amounted to RMB1.7 billion, up 7% YoY, with GPM of 81%. Net profit reached RMB 280 million, a YoY increase of 48%.

In terms of business segment, revenue from the office software and services business increased 17% YoY to RMB1.2 billion. In April, the company launched upgraded WPS 365, the new productive forces in office, covering the upgraded versions of WPS Office, WPS AI Enterprise Edition, and WPS Collaboration, and providing users with one-stop AI office solutions. Revenue from the online games and others business decreased 1% YoY to RMB911 million. The flagship JX3 Online maintained a steady performance. The company actively operated the anime shooter game, Snowbreak: Containment Zone, which achieved significant increases in both daily active users and gross receipts in the first quarter. The sci-fi game Mecha BREAK (解限機) received the license approval in March 2024, and is undergoing testing and continuous optimization in Chinese Mainland and overseas regions. It is recommended to buy at HK$23.00, target at HK$26.00, and stop loss at HK$21.50.