KGI Asia Commentary

2024.05.03 09:47

Hang Seng Index rose 444 points on Thursday

The Hang Seng Index rose 444 points or 2.5% to 18,207 on Thursday. HSTECH rose 164 points or 4.5% to 3,865 and HSCEI rose 163 points or 2.6% to 6,437. Daily market turnover was HK$115.9bn.

S&P 500 closes higher, tech stocks lead gains

The S&P 500 closed higher on Thursday, led by technology stocks, as investors continued to digest a slew of corporate earnings ahead of the key monthly jobs report on Friday. The Dow Jones Industrial Average rose 322.37 points, or 0.85%, to close at 38,225.66 points. The S&P 500 rose 0.91% to close at 5,064.20 points, and the Nasdaq rose 1.51% to close at 15,840.96 points. Chipmaker Qualcomm shares rose 9.7% on better-than-expected earnings and strong revenue guidance. Shares of restaurant delivery service DoorDash fell 10.3% after the company reported a wider loss per share. After the bell on Wednesday, used car retailer Carvana reported its best-ever earnings, sending the company's shares soaring 33.8%, while Moderna's shares rose 12.7%, falling less than expected. Big tech stocks rose as U.S. Treasury yields fell, with Nvidia and Amazon both up more than 3%. Apple rose 2.2% after the bell ahead of its quarterly earnings report. Thursday's move follows a volatile day on Wall Street as investors reacted to the Federal Reserve's decision to keep interest rates on hold on Wednesday, with Chairman Jerome Powell largely ruling out a rate hike as the central bank's next move.

Market focus eyes on nonfarm payrolls report

Initial Jobless Claims for Apr/27 in United States is 208K, the same as the previous quarter. The forecast is 212K. The number of continuing claims for the week ending April 20 was 1774K, lower than the 1797K expected. According to the latest futures market pricing from CME FedWatch, traders currently expect only a 14% chance of a rate cut in June. Investors are currently focused on the April non-farm payrolls report released on Friday. Analysts expect the number of jobs to increase by 240,000 in April, down from 303,000 in March.

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Tencent
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Tencent will announce its first-quarter results in May. The market expects revenue growth to slow down, mainly dragged by the performance of mobile games. However, the market expects a slight improvement in the second quarter. Looking back at Tencent’s fourth quarter performance, its revenue amounted to RMB155.2bn, increased 7% yoy and 0.4% qoq, slightly missed market expectation. But net profit comes at RMB42.6bn, matched market expectation. In terms of segment business, the value-added service revenue was at RMB69.1bn, fell by 2% yoy. The international market games were higher than expected, while the local market games were lower than expected. The latter was mainly affected by the reduced contribution of "Honor of Kings" and " Peacekeeper Elite ". Meanwhile, the growth rates of the other two business segments were significantly better. Revenue from the online advertising business during the period increased by 21% yoy to RMB29.8bn, which was better than expected, propelled by advertising demand for Video Accounts, as well as the ongoing upgrade of its advertising platform. All categories except for automotive saw a year-on-year increase in advertising spending with the Tencent, with particularly notable growth in Internet services, healthcare and consumer goods categories. Revenue from FinTech and Business Services also increased by 15% to RMB 54.4bn, but was slightly lower than expected. During the period, gross profit margin increased by 7 percentage points year-on-year to 50%, thanks to the revenue structure tilting towards high-margin businesses and cost control. In the medium to long term, Tencent's moat remains, and its gross profit margin expansion is also a catalyst. Target price: $370; Stop- Loss price: $290.

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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