KGI Asia Commentary

2023.01.09 09:00

HSI fell 60 points on Friday

The Hang Seng Index opened 168 points higher on Friday and closed at 21,220 points. The trend was volatile, and it fell 60 points throughout the day to 20,991 point. HSCEI fell 29 points or 0.4% to 7,143 point. The Hang Seng Technology Index fell 63 points, or 1.4%, to 4,431 point. The market turnover was HK$148.3 bn. Abu Dhabi Bank said that the process of acquiring Standard Chartered (2888) no longer under consideration and its stock price rose 4.5% to HK$64.3. It was reported that China plans to relax financing. Mainland property developer stocks performed well. Country Garden (2007) rose nearly 6%.

Expectations of low wage growth ease inflation pressure

The U.S. released employment data on Friday that exceeded expectations. Non-agricultural employment increased by 223,000, which was higher than market expectations of 200,000. The unemployment rate fell to 3.5% amid rising labor force participation, lower than market expectations of 3.7%. Reflecting the US job market is still hot. However, average hourly earnings growth have slowed down and rose 4.6% year-on-year, lower than market expectations of 5%.

While signs such as decelerating wage growth point to easing price pressures, some officials remain conservative and mentioned inflation remains too high for the Fed. Former Federal Reserve Board member Randall Kroszner pointed out that “the Fed will definitely continue to raise interest rates in February and is expected to continue to raise interest rates in March, but the possibility of raising interest rates by 25 basis points at these two meetings will be greater than raising interest rates by 50 basis points. I think this will be such a trend.” The two-year U.S. Treasury bond yield fell 19 basis points to 4.272, and the three major indexes all rose. The Nasdaq index rose 264 points or 2.56% to 10,569 point, and the S&P 500 index rose 87 points or 2.28%, to 3,895 point, the Dow Jones index rose 700 points, or 2.13%, to 33,630 point.

40-day Spring Festival travel begins on Sunday

The 40-day Spring Festival travel season officially started on Sunday. Statistics show that the number of railway travel inquiries and reservations has increased by nearly 20% year-on-year. The pre-sale of tickets for January 21 is 2.5 times more than the same period in December last year. Officials predict that this year’s Spring Festival travel passenger flow with a total number reaching 2.1 bn, returning to about 70% of the 2019 Spring Festival Transport. Spring Festival is the traditional peak season for consumption, among which gold jewelry is a popular choice. Investor could pay attention to the release of consumption data such as Chow Tai Fook (1929) in the future, and it is expected that gold and jewelry will outperform among consumer stocks.

Hong Kong Stock Connect had a net outflow of HKD1.344 bn on Friday, of which China Mobile (941) had the largest net inflow of HK$318 mn; followed by Xiaopeng Motors (9868). WuXi Biologics (2269) recorded the largest net outflow of HK$434 mn; followed by China Construction Bank (939).

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Bosideng
03998

The outlook of consumption stocks is optimistic this year. The reopening of the mainland and rising household savings rates can support the recovery of consumption after the reopening. As a renowned operator in the PRC with down apparel brands, the Group has brands include Bosideng, Snow Flying, Bengen, etc. Coupled with the fact that cold winter can boost sales, the stock price of Bosideng has been relatively strong recently. Bosideng's 1H22 net profit increased by 15% yoy to RMB0.7bn, and its revenue increased by 14.1% yoy to RMB6.18bn. The performance was roughly in line with expectations. The branded down apparel business remained the biggest revenue contributor of the Group, and recorded revenue of approximately RMB3.85bn, accounting for 62.4% of total revenue, representing a yoy increase of 10.2%. The OEM management business recorded revenue of approximately RMB1.89bn, accounting for 30.7% of total revenue, representing a yoy increase of 32.7%. In terms of products, through innovation, the Group effectively enhanced the variety of its product categories, actively promoted upgrades in terms of commodity structure. Meanwhile, its recent store opening tends to locate in core cities and major business districts, aiming to upgrade its brand image. The strategy will help enhance its competitiveness in the long run and continue to benefit from the trend of domestic substitution. As Chinese consumers demand down apparel of better quality and design, Bosideng can continue to enjoy a rise in both price and volume. Target price: $4.7; 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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