KGI Asia Commentary

2023.05.02 09:00

Hang Seng Index closed on Monday

Monday was Hong Kong Labor Day Holiday and Hong Kong stock market was closed for the whole day.

More than half of S&P 500 companies reported 1Q23 earnings beat market

More than 50% S&P 500 companies have announced their 1Q23 quarter earnings, and the overall was performed well. Under those reported companies, 79% of them beat consensus, above the 10-year average of 73%. The level of EPS was higher 6.9% over the consensus, slightly higher than the past decade, but significantly lower than the five-year average of 8.4%. YoY EPS rose in 5 of the total 11 sectors, led by consumer discretionary and industrials. On the other hand, EPS fell YoY in six sectors, led by materials and healthcare. Finally, in terms of revenue, 74% of the companies are higher than consensus, and 2.1% YoY growth is higher than the 10-year average. For the 2Q23, analysts expect a -5.0% drop in earnings. For the 3Q23 and 4Q23, earnings are expected to rise 1.7% and 8.8%, respectively.

The three major US stock indexes first rose and then fell. The DJIA fell 46 points or 0.14% to close at 34,051; the Nasdaq fell 13 points or 0.11% to 12,212; the S&P 500 fell 1 point or 0.04% to close at 4,167.

China manufacturing PMI falls into contraction again in April

During the Labor Day holiday, the demand for tourism in China had a strong rebound. Referring to data from online platform, the number of ticket orders for tourist attractions has increased by more than 500% compared with 2019. However, manufacturing demand was affected by the decline in external demand, and China manufacturing PMI fell into contraction again. The April manufacturing PMI fell to 49.2, a four-month low and down from 51.9 in March. Such declining was higher than consensus. To analyse PMI’s main components, the manufacturing new orders, import orders, raw material inventory, and employment index were all below 50. The non-manufacturing PMI dropped from a high point to 56.4 from 58.2 last month, but it is still in the expansion stage.

Hong Kong Stock Connect was closed on Monday due to a public holiday.

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China Telecom
00728

Operating revenues of the Company amounted to RMB481.4bn, representing an increase of 9.5% over last year. EBITDA amounted to RMB130.4bn, increased 5.2% yoy. Net profit amounted to RMB27.6bn, increased 6.3% yoy. In 2022, mobile communications service revenues amounted to RMB191.0bn, representing an increase of 3.7% over the last year, maintaining favorable growth. The penetration rate of 5G package subscribers reached 68.5% and mobile ARPU grew 0.4% yoy reaching RMB45.2. The Company is moving forward with its “Cloudification and Digital Transformation” strategy, stepping up the construction of intelligent and comprehensive digital information infrastructure, and actively building the industrial ecologies of 5G, cloud computing, cybersecurity, artificial intelligence and industrial intelligent manufacturing. The company expects to record a 70% growth of the Cloud revenue. That say, the Company has stable core business, coupled with emerging businesses that are bringing in new growth potentials. The full year dividend of 2022 amounts to RMB0.196 per share, represents the payout ratio to be at 65% of the profit attributable to equity holders of the Company for the year. Management is confident it can post double-digit profit growth this year, implying a higher dividend per share for the year. Target price: $5.2; Stop- Loss price: $3.7.

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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