Hong Kong Stock Market Agriculture Sector Moves Strong: Pig Cycle Reversal + Policy Catalysts, Breeding Leaders Lead Rebound

On July 31, the Hong Kong stock market showed volatile differentiation, but the agricultural sector emerged as a bright spot. By the close, the Hang Seng Index fell slightly by 0.12%, while the agriculture, forestry, animal husbandry, and fishery sector surged by 2.36% against the trend. Several pork-related stocks hit new highs within the year, attracting widespread market attention. Policy Reinforcement Sends Positive Signals from Pig Production Capacity Control In terms of news, the Ministry of Agriculture and Rural Affairs released the Implementation Plan for Pig Production Capacity Control (2026 Revision) after market hours on July 30, clarifying that the target for the normal breeding stock of sows nationwide has been adjusted from the previous 40 million head to 39 million head, and the warning range has been optimized simultaneously. This is the first time the target has been lowered in the last three years, which the market interpreted as a clear signal that capacity reduction is about to enter a deep phase. The plan also proposed increasing the efforts of central reserves to procure pork. Temporary procurement will be initiated when the pig-grain price ratio falls below 6:1, and local authorities are encouraged to expand procurement scale. Industry insiders believe that with continuous policy efforts, the expectation of shrinking pig supply is growing, and the bottom signal of the pig cycle is becoming clearer. Earnings Drive: Leading Breeding Companies' Interim Reports Exceed Expectations, Igniting the Market In addition to the positive policy environment, the improvement in fundamentals was the core driver for the strength of agricultural stocks. During the day, COFCO Jiajiakang (01610.HK) released a positive earnings forecast, expecting net profit to grow by over 200% year-on-year in the first half of 2026. The company stated that its breeding business gross profit margin significantly improved due to the year-on-year rebound in pig prices and the decrease in feed costs. This positive news directly ignited the sector's enthusiasm. By the close, COFCO Jiajiakang surged by 8.42% to HKD 3.09; Wanzhou International (00288.HK) rose by 4.76%; Yurun Food (01068.HK) rose by 6.15%; and Huishang International (01340.HK) rose by 5.23%. Furthermore, the feed sector also strengthened, with related industry chain stocks following suit. From industry data, as of July 30, the national average price of live pigs had recovered to RMB 18.6/kg, an increase of over 35% from the March low. The breeding stock of sows has continuously decreased month-on-month for five months, with a cumulative decrease of 4.2%, and the effect of capacity reduction is becoming evident. Technical and Capital Factors Resonate From the market board, the trading volume of the agricultural sector significantly increased today, with COFCO Jiajiakang's turnover being 3 times that of the average of the previous 5 days. Capital flow data shows that Southbound funds net bought over 500 million HKD in the agricultural sector in one day, the largest net inflow in the last half year. Among them, Wanzhou International saw a net purchase of 180 million HKD, and COFCO Jiajiakang saw a net purchase of 210 million HKD. Regarding the Hang Seng Index trend, although the overall market performance was flat, the activity of the agricultural sector effectively offset the pressure from the pullback of technology stocks. Some traders pointed out that agricultural stocks have a defensive attribute, and their configuration value is prominent in the current environment of high macroeconomic uncertainty. Institutional View: The Pig Cycle Reversal Enters Verification Phase Several international investment banks released research reports today, giving a positive rating to the agricultural sector in Hong Kong stocks. A recent report from Goldman Sachs pointed out that the Chinese pig farming industry is undergoing a new round of capacity clearance, and leading enterprises will fully benefit from the optimization of the industry structure due to their cost advantages and financial strength. It is expected that pig prices will remain high in the second half of 2026, and the profitability of breeding enterprises is expected to continue exceeding expectations. UBS analyzes from a valuation perspective, suggesting that the overall P/E ratio of the Hong Kong agricultural sector is at a low point in the last decade, and a valuation recovery is expected as profitability improves. It recommends focusing on leading enterprises with cost advantages and production elasticity. CICC-Leshan Securities stated that the tightening of policies to regulate live pig production capacity will further promote industry concentration, with the market share of leading companies expected to increase from the current 12% to over 20% by 2028, indicating huge long-term growth potential. Risk Warning and Investment Recommendations Although the sector outlook is positive, investors must also be wary of potential risks. On one hand, after a rapid short-term rise in live pig prices, there may be downward correction pressure; on the other hand, if subsequent capacity reduction does not meet expectations, the turning point of the pig cycle may be delayed. Considering all factors, institutions generally recommend a strategy of "prioritizing leaders and positioning during downturns." Regarding specific stocks, COFCO Joyco, as the live pig breeding platform under COFCO Group, has industry-leading cost control capabilities; while Wanzhou International has an attractive dividend yield due to its global layout hedging live pig cycle risks. For more information on the performance of Hong Kong agricultural stocks and in-depth analysis of individual stocks, please continue to follow the Hong Kong Stock Market Trend column on the Agricultural Stock Information Network.