Daily Investment Strategy

Daily focus：China Shenhua（1088）

The company's net profit for the first half of 2025 is about RMB2.56bn to RMB2.76 billion, down 15.8% to 21.9% from the same period last year, mainly due to the decline in coal prices and sales, reflecting market supply and demand pressures. Coal production and sales fell slightly by 1.7% and 10.9% respectively, and power generation also decreased by about 7%. The cost of coal production in the second quarter improved due to labor and material cost control, and the unit cost remained below RMB300/ton, which is the company's competitive advantage. The price of thermal coal fell more than expected in the first half of the year, and began to rebound in July due to rising temperatures. It is expected that increased demand and reduced imported coal will support prices in the second half of the year, but may face pressure after the summer peak. The fulfillment rate of long-term contracts is higher than required, and the long-term contract price of thermal coal in July was RMB666/ton. The power sector's profits declined due to the decline in coal prices and utilization, showing the challenges of diversified operations. The management pays attention to cost management and policy changes. It is expected that the long-term contract policy may be adjusted in 2026. Shenhua is expected to maintain its market competitiveness with its low-cost advantage and stable operation.

U.S. retail sales far exceeded expectations in June

The S&P 500 rose 0.5% to 6,297 on Thursday, driven by strong retail sales data and corporate earnings reports. However, the most attention was paid to the unexpectedly strong growth in retail sales in June. The U.S. Department of Commerce reported that retail sales in June increased 0.6% month-on-month to $720.1 billion, far exceeding economists' expectations of a 0.1% increase and up 3.9% from the same period last year. The data reflects the resilience of consumer spending, as household spending remains solid despite Trump's tariff policy starting to push up prices. Sales growth mainly came from grocery stores (1.8%), auto parts (1.2%) and building materials (0.9%), while gas station sales were flat and furniture and electronics fell slightly by 0.1%. This eased market concerns about a slowdown, but the increase in grocery sales may simply represent consumers stocking up early. Analysts pointed out that this data suggests that GDP growth in the third quarter may exceed 2%, and consumer spending accounts for two-thirds of the economy, indicating that the mid-cycle expansion continues. Nevertheless, the long-term effects of tariffs may exacerbate inflationary pressures and affect future consumption patterns.

Hong Kong Stock Connect recorded a net inflow of HK$1.86bn on Thursday, of which Meituan (3690) recorded the largest net inflow of HK$610mn, followed by China Construction Bank (0939). Pop Mart (0992) recorded the fastest net outflow of HK$840mn, followed by Tencent (0700).