KGI Asia Commentary

2024.01.05 09:00

Hang Seng Index was flat on Thursday

The Hang Seng Index was flat at 16,645 on Thursday. HSTECH rose 8 points or 0.2% to 3,654 and HSCEI rose 20 points or 0.4% to 5,649. Daily market turnover was HK$70.3bn.

Nasdaq closes lower for fifth straight day, longest losing streak since October 2022

The technology-heavy Nasdaq index fell 0.56% to close at 14,510.30 points. Since closing on December 27, the index has fallen nearly 4%. The S&P 500 fell 0.34% to close at 4,688.68 points, its fourth consecutive day of losses. The Dow Jones Industrial Average was an exception, barely rising 10.15 points to close at 37,440.34 points, an increase of 0.03%. Big tech stocks like Apple have underperformed at the start of the year as overvalued valuations and uncertainty over when the Federal Reserve will start cutting interest rates have led investors to worry that the market is too optimistic. Apple shares fell more than 5% this week. Shares of the tech giant fell more than 1% on Thursday after Piper Sandler downgraded the company, following a downgrade from Barclays two days earlier. Mobileye Global fell 24.5% after it forecast preliminary revenue for fiscal 2024 that missed expectations, while Walgreens Boots Alliance (WBA) fell 5.1% after it cut its dividend in half. Rising yields on longer-dated U.S. Treasuries, with the benchmark 10-year note closing at 4%, prompted traders to move away from growth stocks and into other sectors. Financials were one of the few positive sectors in the S&P 500, buoyed by Allstate (ALL), which rose 2.4% to close at a record high after Morgan Stanley upgraded the insurance company to "overweight". Bank stocks are doing well ahead of earnings season starting next week. JPMorgan Chase & Co. (JPM) and Truist Financial Corporation (TFC) rose 0.7% and 1.3% respectively, with both companies received positive rating from analyst. Among the latest economic data, the ADP employment report showed that U.S. private employer hiring exceeded expectations in December, indicating that the job market continues to be strong and should continue to support the economy. U.S. non-farm payrolls data will be released on Friday.

U.S. private companies added 164,000 jobs in December

According to data from employment data processing agency ADP, private employment was 164,000 last month, higher than the downwardly revised 101,000 in November and the expected 115,000. At the same time, wage growth fell to 5.4% from 5.6% a month ago, continuing a deceleration that began in September 2022. "We're returning to a labor market that's very much aligned with pre-pandemic hiring," said ADP Chief Economist Nela Richardson in a statement. "While wages didn't drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared."

Hong Kong Stock Connect had a net inflow of HK$2.15bn on Thursday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$0.98bn; followed by CNOOC (883). Tencent (700) recorded the largest net outflow at HK$0.42bn, followed by CCB (939).

Recommended Stocks

Capture the moment and trade with KGI Asia's insights

Stocks

Recommended

Stocks

Recommended

CNOOC
00883

In 2023, with further independent production cuts by Saudi Arabia and Russia, crude oil supply and demand has returned to balance and encouraged oil prices to rise. It is expected that OPEC+ may further reduce production slightly in 2024, but the increase in production from non-OPEC countries can eliminate OPEC+ production cuts, especially the increase in U.S. crude oil production, causing a slight oversupply in the overall crude oil market. As the emerging market sentiment has recovered slightly, the market's demand estimates maybe too conservative. The current inventory of crude oil or other petroleum products is low, so a small oversupply of crude oil will not cause a sharp drop in oil prices. The downside risk to oil prices is that high interest rates in Europe and the United States lead to a decline in the economy. The spillover of the Israeli-Palestinian conflict to surrounding oil-producing countries, resulting in production reductions in Middle Eastern oil-producing countries, is the upside risk to oil prices. Recently, oil prices have risen, driven by protests at Libya's largest oil field and tensions in the Red Sea. CNOOC's stock price is highly correlated with oil prices, and therefore upside potential remains. Target price: $15; Stop- Loss price: $12.

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.

The materials contained herein are provided by KGI Asia Limited ("KGI") for information only. While such materials are based on or derived from sources believed to be reliable, KGI makes no representation or warranty (express or implied) as to their accuracy or reliability. Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or solicitation of an offer to buy or sell any securities or investments. KGI and its officers, employees, agents and affiliates may have interests in the securities or investments covered herein and accept no liability whatsoever for any loss or consequence whatsoever (whether direct or indirect) resulting from any use of or reliance by you on such materials.