KGI Asia Commentary

2023.01.05 09:00

Hang Seng Index rose 647 points on Thursday

The Hang Seng Index rose 647 points or 3.2% to 20,793 on Thursday. HSTECH rose 193 points or 4.6% to 4,427 and HSCEI rose 231 points or 3.4% to 7,065. Daily market turnover was HK$149.6bn.

U.S. stocks end higher, snapping 2-day losing streak

The Dow ended higher on Wednesday as investors digested Federal Reserve December meeting minutes that suggested higher interest rates would remain high for longer and data showing a tight job market raised concerns about rising wage-driven inflation. The Dow Jones Industrial Average rose 133 points, or 0.40%, to 33,269.77. The S&P 500 rose 0.75% to 3852.97; the Nasdaq Composite rose 0.69% to close at 10458.76. Travel and leisure stocks were in focus as cruise stocks rallied after Carnival Corp said it would raise its price for U.S. and European guests starting April 1. Carnival Corporation (CCL) rose 9.6%, while Royal Caribbean Cruises (RCL) and Norwegian Cruise Line (NCLH) rose more than 7% and 5%, respectively.

Fed officials expect higher rates for ‘some time’ ahead

Minutes of the Federal Reserve's December meeting released on Wednesday showed officials were committed to fighting inflation and expected to keep raising rates until more progress was made. They showed the importance of keeping policy restrictive at a time when inflation remains unacceptably high.“Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time,” the meeting summary stated. “In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy.”

Job openings fell by about 50,000 to 10.45 million in November 2022, just shy of October's total but above the 10 million FactSet forecast, according to the monthly JOLTS report from the U.S. Bureau of Labor Statistics. Fed officials are closely watching the JOLTS survey for signs of a cooling labor market. Job vacancies remained at 6.4% of the labor force, suggesting that demand for workers remains high despite the Federal Reserve's efforts to cool the economy and lower inflation, which is driven in part by rising wages. On the other hand, the ISM manufacturing index showed that the industry contracted after 30 months of expansion, suggesting that higher interest rates may be slowing the economy.

Hong Kong Stock Connect had a net inflow of HK$5.01bn on Wednesday, of which China Mobile (941) had the largest net inflow, reaching HK$0.92bn; followed by Kuaishou (1024). CCB (939) recorded the largest net outflow at HK$0.21bn, followed by CG Services (6098).

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Tencent
00700

China's National Press and Publication Administration (NPPA) on 28th unveiled the approval results for the new batch of domestic online games, marking the first time in the last 18 months. For the 129 new game approvals, Tencent received six. Market see this as a positive signal for the industry. Meanwhile, officials at the Central Economic Work Conference previously said they would support platform companies to play a leading role in development. The attitude of the mainland authorities towards technology and Internet companies has improved significantly, which means that the regulatory pressure is expected to be reduced, and the business environment can be improved. The worst case scenario is expected to be over. The valuation of Internet stocks is expected to recover. Tencent’s third quarter net profit of RMB39.943bn, up 1.1% yoy, beating expectations. Net profit on a non-IFRS basis increased by 1.6% to RMB32.254bn. Cost of revenues decreased by 2%, reflecting effective cost control efforts, versus increased costs associated with the growth of Video Accounts services. Overall, the worst time was over. All segments recorded improvement on a quarterly basis, and costs have been properly controlled. Future growth driver continue to be seen in the development of video account services and the overseas expansion of games. Target price: $420; Stop- Loss price: $300

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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