Daily Investment Strategy
Daily focus：China Railway Group（390）
The U.S. recently added Tencent and CATL to the 1260H list. This has sparked fears of further pressure on Chinese firms, prompting funds to shift from high-geopolitical risk to lower-geopolitical risk stocks. China Railway is not on any list, representing a lower geopolitical risk. China’s large-scale local government debt swap program can allow local governments to settle debts and fund new projects, benefitting the infrastructure sector. Meanwhile, recent policy updates from the NDRC and Ministry of Finance highlight continued support for key areas, including industrial equipment, energy, and transportation, benefiting the sector. Supported by the government debt swap program, cash flow is expected to improve. With a dividend yield over 6%, the company remains attractive amid China’s low-interest environment. Target price: $4.1.
Core CPI unexpectedly cooled in December
The S&P 500 ended sharply higher on Wednesday, as cooling inflation and strong quarterly earnings from Wall Street banks boosted bullish sentiment in the stock market. The Dow rose 703 points, or 1.7%, the S&P 500 rose 1.8%, and the Nasdaq rose 2.5%. The core CPI increased by 3.2% yoy, down 0.1 ppts from the previous month and slightly lower than the 3.3% forecast. The monthly increase was 0.2%, which was also 0.1 ppt lower than expected. Affected by the CPI report, the 10-year U.S. Treasury bond yield fell sharply, finally falling by about 13 basis points to around 4.65%. As U.S. Treasury yields fell, growth stocks such as Tesla and Nvidia gained 8% and 3%, respectively. In addition, a number of large banks reported satisfactory latest quarterly results on Wednesday, with JPMorgan Chase's stock price rising 2%; Goldman Sachs' stock price soaring 6%.
Hong Kong Stock Connect had a net inflow of HK$9.35bn on Wednesday of which Tencent (700) had the largest net inflow, reaching HK$1.91bn; followed by SMIC (981). Meituan (3690) recorded the largest net outflow at $0.47bn, followed by Weimob (2013).
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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