Pig cycle reversal signals strengthening: Hong Kong stock breeding leaders strengthen against the trend, Southbound capital densely positions

On September 18, 2026, the Hang Seng Index fluctuated early in the morning, while the agriculture sector showed strength against the trend, with the breeding sector leading the gains. Southbound capital net bought over 500 million HKD in Hong Kong agricultural stocks that day, focusing on breeding leaders such as Muyuan Co., Ltd. and Wenshi Co., Ltd. The Hang Seng Agriculture Index rose by 1.2%, outperforming the Hang Seng Index by 0.8 percentage points. Market analysis suggests that the bottoming signal of the pig cycle is becoming clearer, and coupled with policy catalysts, the agriculture sector presents a good investment opportunity. I. Market Overview: Hong Kong Agricultural Sector Strengthens Against the Trend, Breeding Leaders Lead the Rise On September 18, 2026, the overall performance of the Hong Kong stock market was subdued, with the Hang Seng Index slightly declining by 0.3% in the early morning, but the agriculture sector stood out as a market highlight. The Hang Seng Agriculture Index closed up 1.2%, leading various industry sectors. Among them, the breeding sector saw the highest gains, with Muyuan Co., Ltd. (0168.HK) rising by 3.5%, Wenshi Co., Ltd. (0371.HK) rising by 2.8%, and Xinxiang Group (0978.HK) rising by 2.1%. Southbound capital net bought over 500 million HKD in Hong Kong agricultural stocks that day, increasing holdings in breeding leaders for the third consecutive day, indicating market confidence in the agriculture sector. Analysts point out that the main reason for the agriculture sector's strength against the trend is the manifestation of the bottoming characteristics of the pig cycle, with pig prices gradually recovering, compounded by increased policy support, leading to market expectations of a reversal in the pig cycle. Furthermore, the valuation of agricultural stocks in Hong Kong is at a historical low, with a Price-to-Earnings ratio of about 8-10 times, which is lower than comparable A-share enterprises, offering a high margin of safety. II. Pig Cycle Status: Bottoming Characteristics Emerge, Pig Prices Gradually Recover The pig cycle is the core driving factor for the agriculture sector, currently in the bottoming repair phase after capacity reduction. According to the latest data released by the Ministry of Agriculture and Rural Affairs, the national average price of live pigs in August 2026 was 14.5 RMB/kg, an increase of 0.8 RMB/kg from July, a month-on-month increase of 5.8%. The self-sufficient pig farming cost for pig farming enterprises is about 15-16 RMB/kg. Although the current pig price is still below the cost line, it has approached the bottom range, and the bottoming signal is becoming clearer. There are two main drivers for the recovery in pig prices: first, the contraction of supply due to previous capacity reduction. In the first half of 2026, the national live pig inventory decreased by 3.2% year-on-year, and the breeding sow inventory decreased by 4.5% year-on-year, showing a clear trend of capacity reduction. Second, the gradual recovery of consumer demand. As traditional consumption peaks such as Mid-Autumn Festival and National Day approach, the demand for pork increases, driving pig prices upward. In addition, the decline in feed prices has reduced farming costs, improving the profit margin for farming enterprises. From historical data, the pig cycle usually goes through a cycle of "capacity expansion-price decline-capacity reduction-price recovery." The current stage is "capacity reduction-price recovery," and the probability of a pig cycle reversal is gradually increasing. Analysts predict that pig prices will rise to 16-18 RMB/kg in the fourth quarter of 2026, and farming enterprises will achieve profitability. III. Breeding Enterprise Performance: Resilience Shown by Volume Supporting Price, Leading Advantages Stand Out Although pig prices are still near the cost line, leading breeding enterprises have performed better than the industry average due to their scale advantages and cost control. In the first half of 2026, Muyuan Co., Ltd. achieved operating revenue of 45 billion RMB, a year-on-year increase of 8%; net profit attributable to the parent company was 1.2 billion RMB, turning around to profitability. Wenshi Co., Ltd. had operating revenue of 38 billion RMB, a year-on-year increase of 5%; net profit attributable to the parent company was 0.8 billion RMB, a 15% increase compared to the same period last year. Xinxiang Group had operating revenue of 42 billion RMB, a year-on-year increase of 6%; net profit attributable to the parent company was 1 billion RMB, a year-on-year increase of 20%. The resilience of leading enterprises stems from two factors: first, economies of scale reduce unit costs. Muyuan Co., Ltd., through its full industry chain layout, has feed costs about 10% lower than the industry average, demonstrating outstanding cost control capabilities. Second, industry chain integration enhances risk resistance. Wenshi Co., Ltd., through the "company + farmer" model, integrates upstream and downstream resources, reducing operating costs and improving profitability. It is worth noting that breeding enterprises are increasing production capacity to prepare for the reversal of the pig cycle. For example, Xinxiang Group plans to add 2 million live pigs in the second half of 2026, and Wenshi Co., Ltd. plans to add 1.5 million. These layouts will lay the foundation for future performance growth. Furthermore, breeding enterprises are reducing costs by optimizing breeding models, such as adopting intelligent breeding technology to improve production efficiency. IV. Capital Flow: Southbound Funds Concentrate on Layout, Optimistic About Long-Term Value Southbound funds are an important source of incremental capital for the agricultural sector in Hong Kong stocks. Since 2026, Southbound funds have net bought over 8 billion HKD in agricultural stocks in Hong Kong, with the breeding sector accounting for 60%. Recently, Southbound funds have increased holdings in Muyuan Co., Ltd. for three consecutive days, with a cumulative net purchase exceeding 1 billion HKD. In addition, Southbound funds have also focused on leading enterprises such as Wenshi Co., Ltd. and Xinxiang. The logic behind Southbound funds investing in agricultural stocks is threefold: first, the valuation of agricultural stocks in Hong Kong is at a historical low, with a P/E ratio of about 8-10 times, which is lower than comparable A-share enterprises, offering a high margin of safety. Second, increased policy support provides long-term benefits to the agricultural sector through policies such as rural revitalization and food security. Third, there are strong expectations for a reversal in the pig cycle, leading to significant potential for performance improvement. Analysts believe that Southbound funds will continue to increase holdings in agricultural stocks, especially leading breeding enterprises. In addition to Southbound funds, institutional investors have also increased their allocation to agricultural stocks. For example, Morgan Stanley recently upgraded the target price of Muyuan Co., Ltd. to 25 HKD, believing that its performance will gradually improve. Goldman Sachs stated that the agricultural sector is one of the most valuable sectors in the second half of 2026 and recommended investors pay close attention. V. Policy Catalysis: Rural Revitalization and Food Security Bring Policy Dividends to the Agricultural Sector Policy support is a major catalyst for the strength of the agricultural sector. In 2026, the country continues to strengthen rural revitalization, issuing multiple policies to support agricultural development. For instance, one year after the implementation of the Rural Revitalization Promotion Law, local regions have increased agricultural subsidies and encouraged breeding enterprises to expand capacity. Furthermore, the food security strategy is being advanced, and live pig breeding, as an important component, is receiving focused policy support. The Ministry of Agriculture and Rural Affairs stated that it will increase support for live pig breeding to ensure stable live pig capacity. The Stock Exchange of Hong Kong recently launched a special financing plan for the agricultural sector to reduce the financing costs of agricultural enterprises. For example, Dekang Animal Husbandry successfully raised funds by issuing a 100 million USD zero-coupon convertible bond to expand capacity. This policy helps agricultural enterprises make counter-cyclical layouts and enhance competitiveness. In addition, the Stock Exchange of Hong Kong has relaxed the listing conditions for agricultural enterprises, encouraging more agricultural companies to list in Hong Kong and inject new vitality into the agricultural sector. VI. Future Outlook: Pig Cycle Reversal is Foreseeable, Agricultural Sector Investment Logic is Clear Looking ahead, the probability of a pig cycle reversal is gradually increasing. On one hand, capacity reduction is ongoing, and the trend of supply contraction is evident; on the other hand, consumer demand is gradually recovering, and pig prices are expected to rise continuously. Analysts predict that pig prices will rebound to 16-18 RMB/kg in the fourth quarter of 2026, and breeding enterprises will achieve profitability. Furthermore, with increased policy support, the agricultural sector will have long-term investment opportunities. For investors, it is recommended to focus on two types of companies: first, leading breeding enterprises, such as Muyuan Co., Ltd. and Wenshi Co., Ltd., which possess significant scale advantages and cost control capabilities; second, integrated industry chain enterprises, such as Xinhoping and Zhengbang Technology, which have a complete industry chain layout and strong risk resistance. Concurrently, investors must monitor pig price trends and capacity changes to adjust investment strategies in a timely manner. Furthermore, the long-term investment value of the agricultural sector lies in policy support and industry consolidation, so investors are advised to hold for the long term to share in the industry's growth dividends.