KGI Asia Commentary

2024.01.10 09:00

Hang Seng Index fell 34 points on Tuesday

The Hang Seng Index fell 34 points or 0.2% to 16,190 on Tuesday. HSTECH fell 30 points or 0.9% to 3,454 and HSCEI fell 31 points or 0.6% to 5,450. Daily market turnover was HK$81.9bn.

Dow, S&P retreat ahead of economic data and earnings

The Dow and S&P ended lower on Tuesday, pressured by a slight rise in U.S. Treasury yields. Ahead of this week's inflation data, investors are assessing the timing and size of the Federal Reserve's interest rate cuts in 2024. Expectations that the Fed could begin cutting interest rates as soon as March have been slowly declining, with CME's FedWatch tool showing a 65.7% chance of a rate cut of at least 25 basis points in March, down from 79% a week ago. That left U.S. Treasury yields hovering around 4%, with the benchmark 10-year Treasury yield last inching up to 4.019% after reaching a high of 4.053% earlier in the session. Investors are awaiting consumer price index (CPI) and producer price index (PPI) data. Earnings season begins on Friday, with banks including JPMorgan. The Dow Jones Industrial Average fell 157.85 points, or 0.42%, to 37,525.16 points. The S&P 500 index fell 7.04 points, or 0.15%, to 4,756.50 points; the Nasdaq index rose 13.94 points, to 14,857.71 points, or 0.09%.

Global economic growth is expected to slow for the third consecutive year through 2024

The World Bank says the global economy will have its worst half decade of growth in 30 years. The organization said in its latest "Global Economic Outlook" report released on Tuesday that global economic growth is expected to slow down for the third consecutive year by 2024, from 2.6% in 2023 to 2.4%. The economic growth rate is expected to rise slightly to 2.7% by 2025, and the acceleration rate during the five-year period will still be nearly 0.75 percentage points lower than the average rate in the 2010s. The group said rising geopolitical tensions will create new near-term challenges, causing most economies to grow at slower rates in 2024 and 2025 than in the previous decade.

Hong Kong Stock Connect had a net outflow of HK$4.0bn on Tuesday, of which China Shenhua (1088) had the largest net inflow, reaching HK$0.14bn; followed by CNOOC (883). Tracker Fund (2800) recorded the largest net outflow at HK$2.08bn, followed by Tencent (700).

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Trip.com
09961

Ctrip reported that the number of New Year's holiday travel bookings in Mainland China surged 168% year-on-year, while the number of outbound travel orders leapfrogged 388%. In terms of travel spending in high-end resort hotels and self-booked tours, the average per capita spending of tourists soared by varying degrees. As a recap of Trip.com's 3Q23 result, its quarter revenue was RMB13.75bn, up 99.4% yoy and 22.1% qoq. Adjusted net profit was RMB4.89bn, up 3.7 times yoy and 42.6% qoq. The third quarter spans the summer vacation period, which is the traditional peak tourism season, therefore recorded strong growth. Domestic tourism business continues to recover, with domestic hotel bookings increased by more than 70% compared to the pre- covid level for the same period in 2019. The outbound hotel and air reservations recovered to around 80% of the pre-COVID level for the same period in 2019, rising from the 60% in the previous quarter, and recorded a faster- than- peers recovery rate. As international flights gradually resume, Trip.com will continue to benefit from the industry recovery. Recent platform data shows that both domestic and foreign travel demand remains resilient, and therefore bringing momentum to the stock price. Target price: $320; Stop- Loss price: $260.

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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