KGI Asia Commentary
HSI rose 147 points on Friday
The Hang Seng Index opened 207 points lower and fell 267 points in mid-day. The HSI fell 407 points or 2.1% to close at 18,668 yesterday; the HSCEI fell 143 points or 2.3% to close at 6,271; the HSTECH fell 89 points or 2.2% to close at 4,015. The total daily turnover of the market was HK$93.5bn. Country Garden (2007)’s domestic bonds fell sharply last weekend with trading halt and its default risk started to be heat again. The stock price fell 8.5% today. Meanwhile, the CEO of CGS (6098) has disposed his shares. Its stock price plummeted 17.8%. Chinese tech stocks generally fell, heavyweights Tencent (0700) and Alibaba (9988) fell 2.4% and 1.9% respectively.
U.S. S&P Composite PMI in July Continues to Fall
The S&P composite PMI index in July was 52, which was lower than the expected 53, and it was 53.2 in the previous month. Although the PMI is still above the expansion line of 50, the market outlook is gradually getting worse. The service PMI fell to 52.4 from 54.4 in the previous month, the lowest since February; the manufacturing PMI rose to 49 from 46.3. It is hard to estimate when recession in manufacturing industry is over, because historically, the Fed has never continued to raise interest rates when new orders for the manufacturing industry have declined.
The three major U.S. indexes all recorded gains. Among them, the DJIA was the best performer, up 183 points or 0.52% to 35,411; the S&P 500 rose 18 points or 0.4% to close at 4,554 points; the Nasdaq Composite rose 26 points or 0.19% to close at 14,058.
Politburo meeting in July may bring positive signal for HSI
The Political Bureau meeting was held in July. In addition to analyzing and studying the current economic situation, there are a few points should be concerned. Firstly, "activating the capital market and boosting investor confidence" was proposed for the first time. It is believed that this will reverse the shrinkage of transactions and increase the activity of private investment and foreign capital. Secondly, "No speculation in property market” has not been mentioned since 2018. We believe that this may provide an important signal for the mainland property market. The restrictive policy for overheated property market may be gradually withdrawn. This makes investors look forward to the restrictions will be relaxed in first or strong-second tier cities.
Hong Kong Stock Connect had a net inflow of HK$9.80bn on Monday, among which Tracker Fund (2800) had the largest net inflow of HK$4bn; followed by Hang Seng China Enterprises (2828). On the other hand, Tencent (0700) recorded the largest net outflow of HK$190mn; followed by SMIC (0981).
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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