KGI Asia Commentary

2024.07.10 09:47

Hang Seng Index close flat on Tuesday

The Hang Seng Index closed flat at 17,523 on Tuesday. HSTECH rose 34 points or 1.0% to 3,600 and HSCEI fell 9 points or 0.1% to 6,275. Daily market turnover was HK$94.3bn.

S&P 500 hits another all-time high

The S&P 500 closed at a record high for a fifth straight session on Tuesday as testimony from Federal Reserve Chairman Jerome Powell did not sway investors' bets on a first interest rate cut in September. The S&P 500 rose 0.1% to a record 5,577.03. The Nasdaq rose 0.2%, extending its record rally; the Dow Jones Industrial Average fell 53 points, or 0.1%. The Consumer Price Index (CPI) for June, scheduled to be released on Thursday, will provide more clues on inflation trends. The Fed has repeatedly said it needs greater confidence that inflation is easing before it starts cutting interest rates. The focus this week will also be on second-quarter earnings, with several major banks set to report this weekend. JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) will report quarterly earnings on Friday. PepsiCo (PEP) and Delta Air Lines (DAL) also report results this week.

Powell points to cooling labor market as emerging risk

Federal Reserve Chairman Jerome Powell said on Tuesday that keeping interest rates too high for too long could jeopardize economic growth. Powell cited some easing in inflation, saying policymakers remain committed to lowering it to their 2% target.“At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” he said in prepared remarks. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

Hong Kong Stock Connect had a net inflow of HK3.6bn on Tuesday, of which China Mobile (941) had the largest net inflow, reaching HK$0.23bn; followed by Meituan (3690).HSBC (5) recorded the largest net outflow at HK$0.30bn, followed by ZTE (763).

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Anta Sports
02020

After Anta Sports announced the 2Q24 sales data, its share price was weak. The market response was negative, mainly due to disappointment with the performance of the FILA brand. However, we believe that the operating performance in the second quarter is not so negative, at least the inventory, discounts, and operating profit margin have not deteriorated. During the period, inventory levels remained stable and healthy, with core brand inventory levels remaining below 5 times. Anta core/other brand discounts improved yoy, and that of FILA remained stable. In terms of 1H24 margin trends, management emphasized that 1H24 OPM were better than expected despite the volatile retail environment. Advertising and promotion (A&P) spending will be more cautious. Core ANTA's OPM in the first half of the year was close to the 1H23 level (21.0%, slightly higher than market expectations); the FILA brand was close to the 2023 level (27.6%, higher than market expectations). Management is confident that it can achieve its full-year OPM target guidance. Target price: $94; Stop- Loss price: $62.

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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