KGI Asia Commentary

2024.05.20 09:47

Hang Seng Index rose 177 points on Friday

The Hang Seng Index opened 149 points higher at 19,525 points on Friday. The index once turned lower and rebounded 177 points, or 0.9%, to 19,553 points throughout the day; the HSCEI Index rose 63 points, or 0.9%, to 6,935 points; the Hang Seng Technology Index rose 40 points or 1% to 4,112 points. The total market turnover for the whole day was HK$179.3 billion. The central government relaxed the down payments for home purchases and pointed out that local governments can purchase residential houses for social beneficial housing uses. Sunac (1918) rose by 25%, and Longfor (960) rose by more than 10%. Alibaba (9988) rose 7.5% to HK$85.7 on news that a well-known investor had increased its holdings.

The Dow closed above 40,000 points for the first time

U.S. stocks closed mixed on Friday. The Dow Jones index rose 134.21 points, or 0.34%, to 40,003.59 points, closing above the 40,000 points for the first time. The Nasdaq index fell 12.35 points, or 0.07%, to 16,685.97 points; The S&P 500 index rose 6.17 points, or 0.12%, to 5303.27 points. All three major U.S. stock indexes posted gains last week. The Nasdaq rose 2.11% and the S&P 500 rose 1.54%, both rising for the fourth consecutive week. The Dow rose 1.24% for the week, recording gains for the fifth consecutive week.

This week, the market will focus on Nvidia’s results and its performance guidance announced after the market closes on Wednesday, U.S. time. However, in general, the performance period of the U.S. stock market is coming to an end, and the fluctuations in individual stocks caused by changes in fundamentals are expected to stabilize, and the market’s focus is expected to return to discussions about the Fed's future monetary policy outlook.

Only industrial added value beat expectation

In China, the performance of industrial added value, fixed asset investment and social retail sales were announced last Friday. However, only industrial added value was better than market expectations. The announced value in April was 6.7%, and the market expected 5.5%; fixed investment was worser than expected, the announced value in the first four months was 4.2%, and the market expected 4.6%. Social retail sales were also lower than expected. The announced value in April was 2.3%, and the market expected 3.7%. Among them, retail sales and catering revenue both declined from the previous value, reaching 2% and 4.4% respectively.

Hong Kong Stock Connect saw a net inflow of HK$5.95 billion on Friday, of which Bank of China (3988) had the largest inflow, reaching HK$1.17 billion; followed by Tencent Holdings (700). Meituan (3690) recorded the largest net outflow of HK$770 million, followed by CNOOC (883).

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SPDR Gold Trust
02840

Gold ETF was our key recommendation in our 2024 market outlook report, and currently our view on gold remains positive. The Federal Reserve kept interest rates at a target range of 5.25%-5.50%, a move widely expected by the market. At a press conference following the monetary policy statement, Fed Chairman Jerome Powell ruled out the prospect of resuming rate hikes. Subsequently, CPI rose less than expected in April, suggesting that inflation resumed its downward trend at the beginning of the second quarter, boosting financial market expectations for an interest rate cut in September. CPI rose 0.3% last month, following a 0.4% rise in March and February. On an annual basis, CPI rose by 3.4% after rising by 3.5% in March. Economists had previously predicted that the CPI would rise 0.4% mom and 3.4% yoy. Core CPI, which excludes volatile food and energy prices, rose 0.3% from March, while on an annual basis it fell to 3.6% from 3.8% in March. Traders see more chance that the U.S. central bank will start cutting rates in September, according to the CME FedWatch Tool. Since gold prices and interest rates are negatively correlated, the upside of gold remains. Looking forward, the geopolitical unrest, together with the rate cut sooner or later, will continue to provide support for gold price. Investors bullish on gold may consider allocating to gold ETFs such as SPDR Gold Shares. Target price: $1800.

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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