KGI Asia Commentary

2024.07.24 09:47

Hang Seng Index fell 166 points on Tuesday

HSI fell 166 pts or 0.9% to 17,469. HSTI fell 65 pts or 1.8% to 3,545. HSCEI fell 59 pts or 0.9% to 6,194. Market turnover reached $85.8 billion.

S&P 500 closes lower as tech giants report earnings

The S&P 500 ended lower on Tuesday, with markets trading cautiously ahead of quarterly results from major technology companies. The Dow Jones Industrial Average fell 57 points, or 0.1%, the S&P 500 fell 0.2% and the Nasdaq Composite fell 0.1%. Coca-Cola Co shares edged higher after the soft drinks giant raised its annual organic sales and profit forecast, signaling strong demand for its drinks in the U.S. and internationally. GE Aerospace shares rose more than 6% as the industrial giant raised its annual profit forecast on strong demand for after-sales services, including jet engine parts. General Motors shares fell more than 6% after the company said it would “indefinitely suspending” work on Origin, the autonomous vehicle being developed by its self-driving subsidiary. United Parcel Service shares plunged more than 13% after the company reported disappointing second-quarter earnings amid weak domestic revenue.

Wall Street continues to evaluate latest second-quarter earnings

Nasdaq futures were lower after tech giants Alphabet and Tesla reported second-quarter results. Alphabet's second-quarter earnings were in line with analysts' revenue and earnings expectations, but YouTube's advertising revenue fell short of expectations. Tesla reported lower-than-expected second-quarter profit, weighed down by lower profit margins and lower electric vehicle sales. More companies are set to report results this week, with about a quarter of the companies in the S&P 500 set to report this week.

Hong Kong Stock Connect had a net inflow of HK0.09bn on Tuesday of which Tencent (700) had the largest net inflow, reaching HK$0.43bn; followed by ICBC (1398). Tracker Fund (2800) recorded the largest net outflow at HK$1.66n, followed by Zijin Mining (2899).

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CCB
00939

The People's Bank of China (PBOC) announced that it lowered the one- and five-year Loan Prime Rates (LPRs) by 10 bps to 3.35% and 3.85%, respectively. The lower of LPRs reflect the authorities' desire to promote economic growth. On the other hand, there were rumors on July 22 that China would lower deposit interest rates, and the market expected bank interest margins to stabilize. Taking the news into consideration, the decline in CN banking stocks has been stabilized. In terms of stabilizing the economy, since the introduction of the four stimulus policies to boost the property market, the mainland property market has seen a weak recovery. According to data, in June 2024, the top 100 real estate companies achieved a sales transaction amount of RMB438.93bn. Although the figure decreased by 16.7% year-on-year, it grew 36.3% month-on-month. As the impact of the high base effect will fade out, the sales area of new homes is expected to begin to show positive year-on-year growth in the second half of the year. Under the new policies, the decline of real estate prices and transaction volumes are expected to slow down, which is beneficial to the asset quality of domestic banks. Among the CN banks, China Construction Bank (939) is one of our top picks in the second half of 2024, meanwhile it also has the SOE concept. CCB's non-performing loan ratio in the 1Q 24 was 1.36%, a decrease of 0.01ppts from the end of last year. The company's financial situation is stable and it will distribute interim dividends in the future. With a dividend yield of over 7%, the share is defensive. Target price: $6.3; Stop- Loss price: $5

Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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