KGI Asia Commentary

2023.10.24 09:00

Hang Seng Index closed on Monday

The Hang Seng Index was closed for one day due to the public holiday yesterday.

Survey finds housing crisis most affecting U.S. financial stability

The US Federal Reserve releases its semi-annual financial stability report, which is surveyed by market participants, academics, and researchers. When it comes to the most dangerous factor in the U.S. financial system, three-quarters believe it is related to the collapse of the commercial property market, compared with only half of those surveyed in the previous survey. Such factor is caused by the Federal Reserve's high interest rate policy. Combined with the fact that Cleveland Fed President Loretta Mester just emphasized that the authorities will keep interest rates at a high level for a long time and may even need to increase interest rates this year. Although she does not have the right to vote in FOMC this year, such comments made by the committee members may reflect that Fed has a strong attitude towards high interest rate policies.

The three major U.S. stock indexes had different trends. Only the Nasdaq composite rose 34 points, or 0.27%, to close at 13,018; the S&P 500 fell 7 points, or 0.17%, to close at 4,217; the DJIA fell 190 points, or 0.25%, to close at 32,936.

Huijin’s increase in ETF holdings may create a bottom for A-shares

Yesterday, the Hong Kong stock market was closed due to holiday. Meanwhile, A-shares continued to perform weakly yesterday. The Shanghai Composite Index fell for the fourth consecutive day, only 54 points away from the "measures bottom" in October last year. Huijin announced that, after increasing its holdings in the four major banks, it bought ETFs and will continue to increase its holdings in the future. Compared with the earlier purchases of the four major domestic bank stocks, purchase of ETFs is more effective to support stock market. Although the sentiment of Chinese economy, especially the real estate market, is still sluggish, if the mainland sets up stabilization funds (like those of foreign countries), it will have a postive impact on the A stock market. However, investor should aware that the scale must be similar to the over one trillion RMB in 2015.

Hong Kong Stock Connect had a net outflow of HK$1.87bn on Thursday, of which Meituan (3690) had the largest inflow, reaching HK$500mn; followed by SMIC (0981). Tracker Fund (2800) recorded the largest net outflow of HK$517mn; followed by CNOOC (0883).

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China Telecom
00728

The operating revenues of China Telecom were RMB384.2bn in 9M23, representing an increase of 6.4% yoy. The profit attributable to equity holders of the Company was RMB27.1bn, grew 10.4% yoy. EBITDA was RMB105.6bn, representing an increase of 5.2% yoy. EBITDA margin was 30.2%. In terms of mobile communications services, there is solid growth in subscriber scale. Revenues from mobile communications services amounted to RMB151.9bn, representing an increase of 2.4% yoy. The total number of mobile subscribers reached approximately 406mn with a net addition of 14.63mn. The number of 5G package subscribers reached approximately 308mn with a net addition of 39.65mn, while the penetration rate reached 75.8%. The mobile ARPU amounted to RMB45.6, representing an increase of 0.2% yoy. In terms of Industrial Digitalization, while focusing on customer demands and use cases, the Company proactively deployed strategic emerging industries. Driven by cloud-, AI-, security-and platform-integrated initiatives, and capitalizing on its edges in cloud-network integration, customer resources and localized services, the Company increased the supply of digital products and services with high quality and high efficiency. The Company also leveraged ‘‘network + cloud computing + AI + applications’’ to promote the cloud migration, the use of data and intelligence injection for numerous walks of life, facilitating the in-depth integration of digital technologies with the real economy. In 9M23, the Company’s Industrial Digitalization service revenues reached RMB99.7bn, representing a yoy increase of 16.5%. China Telecom declared an interim dividend of RMB0.1432 per share based on its 65% payout ratio, and that it will rise to over 70% by the end of 2023. Overall, the 9M23 results are in line with expectations, and the dividend payout ratio is attractive, thus the investment value is still there. Target price: $5; Stop- Loss price: $3.4.

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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