HK Stock Market Move | Cement stock prices lead gains in October, with cement prices continuing to rise both month-on-month and year-on-year. Institutions say there is still significant room for recovery in cement price-to-book ratios.

Cement stocks led the gains. As of the report, CNBM (03323) rose by 7.96% to HK$3.39; BBMG Corporation (02009) rose by 6.33% to HK$0.84; Anhui Conch Cement (00914) rose by 5.35% to HK$21.65; Huaxin Cement (06655) rose by 3.31% to HK$7.8; WESTCHINACEMENT (02233) rose by 3.13% to HK$1.32. According to the data from the National Bureau of Statistics, the cement production in October was 175 million tons, a decrease of 7.9% compared to the same period last year; the cement production from January to October was 1.501 billion tons, a decrease of 10.3% year-on-year, narrowing by 0.4 percentage points compared to the period from January to September. The average price of cement in October was 412 yuan/ton, an increase of 5.9% month-on-month and 11.0% year-on-year, according to the Digital Cement Network. Tianfeng pointed out that the average PB ratio of major cement companies in A-shares is only 0.73 times, at the 5.3 percentile level since 2015, while the ROE for the third quarter is at the 28 percentile level since 15 years ago. The average PB ratio of cement companies in the Hong Kong stock market is only 0.38 times, at the 8.8 percentile level since 2015, and the ROE for the third quarter is at the 15 percentile level since 15 years ago. Historically, there is a strong correlation between ROE and PB for cement companies, wherein PB is a leading indicator of future changes in ROE. With cement prices expected to bottom out and rebound in the fourth quarter, there is a possibility of an upward turning point in ROE, which will drive the PB ratio to recover.