Hong Kong's paper stocks (LIST1230) have demonstrated robust momentum since late June, with the sector posting impressive gains. From June 20 to July 14 closing, paper stocks surged approximately 15%, led by sustained rallies in sector leaders including SUNSHINE PAPER (02002), CHENMING PAPER (01812), LEE & MAN PAPER (02314), and ND PAPER (02689). By July 14 close, SUNSHINE PAPER had climbed 19% monthly while ND PAPER advanced nearly 12%, significantly outperforming the Hang Seng Index.

This upswing appears primarily driven by declining raw material costs. Global wood pulp prices have softened throughout 2024, with European softwood pulp quotations down roughly 15% year-to-date by end-June, mirrored by declining domestic hardwood pulp spot prices. As Guotai Junan research notes, paper producers' gross margins exhibit strong negative correlation with pulp prices, suggesting Q3 profit elasticity may emerge as cheaper inventory enters production cycles.

Simultaneously, industry leaders have issued frequent price hike notices. Cultural paper producers including SUNSHINE PAPER and CHENMING PAPER implemented multiple price increases since June, cumulatively raising ex-factory prices by 300-500 yuan/ton. CITIC Securities observes that seasonal restocking demand combined with lean downstream inventories should facilitate smooth price transmission, further restoring corporate profitability.

Technical indicators reveal a bullish pattern: the sector gained 13.73% during the 16-session period, peaking at HK$276.473 with turnover exceeding HK$560 million. SUNSHINE PAPER particularly stood out with a 20.71% surge. The sector displayed 13 positive closes out of 16 sessions (over 80%), with bullish session volume (216.7 million shares) dwarfing bearish turnover (35.3 million shares). The steady "two steps forward, one step back" advance from HK$239.455 low occurred without single-day corrections exceeding 5%. Notably, volume peaked at 33.886 million shares when prices breached the key HK$250 resistance - approximately 4.8 times the trough volume - signaling accelerated institutional participation.

Currently trading above the 120-day moving average with bullish short-term MA alignment, the sector shows MACD golden cross expansion and RSI below overbought territory. Sustained volume above HK$280 resistance could unlock further upside, though failure to hold HK$250 support may trigger technical pullbacks.

Despite these positives, underlying supply-demand pressures persist. Industry data indicates 2024 brought 4.9% producer expansion, 18.5% YoY fixed-asset investment growth, and 158 million tons of machine-made paper output (+8.6%). While above-scale enterprises achieved RMB1.46 trillion revenue (+3.9%) and RMB51.97 billion profits (+5.2%), 2025 projections suggest continued margin pressure.

Leading firms counter through innovation and global expansion: ND PAPER, SUNSHINE PAPER, and peers reported 2024 sales volume growth ranging from 4.9% to 38.7%. Overseas revenue surged dramatically for multiple players, including 73.2% growth for one manufacturer.

Micro-level improvements emerge from dual catalysts: pulp cost relief and successful price hikes. Export markets shine particularly bright, with China's corrugated paper exports jumping 34% YoY in Jan-May, led by Southeast Asian and Middle Eastern demand. Valuation discrepancies remain stark - ND PAPER trades below 8x forward P/E and LEE & MAN PAPER near 6x, both under five-year averages. With LIST1230 still 20% below 2024 highs and southbound capital accumulating sector leaders, sentiment appears increasingly constructive.

The rally stems from converging tailwinds: input cost relief, marginal demand recovery, and valuation repair. Near-term profitability should benefit from sustained low pulp prices and seasonal price increases, while medium-term prospects hinge on industry rebalancing and overseas expansion efficacy. Despite domestic demand uncertainties, current valuations and capital flows reflect growing market confidence in paper stocks.