KGI Asia Commentary

2023.02.16 09:00

Hang Seng Index fell 301 points on Wednesday

The Hang Seng Index fell 301 points or 1.4% to 20,812 on Wednesday. HSTECH fell 41 points or 1.0% to 4,288 and HSCEI fell 92 points or 1.3% to 7,018. Daily market turnover was HK$112.3bn.

U.S. stocks end slightly higher as investors weigh implications for retail sales and inflation data

Strong U.S. retail sales in January added to market concerns about the Fed’s continued interest rate hikes. U.S. two-year Treasury yields hit a three-month high. U.S. stocks were volatile on Wednesday. The Dow Jones Industrial Average rose 38.78 points, or 0.11%, to close at 34,128.05, rebounding more than 250 points from its session low. The S&P 500 rose 0.28% to 4,147.60. The Nasdaq Composite rose 0.92% to 12,070.59, boosted by shares of Airbnb, which rose 13.35% after beating earnings estimates. Apple and Alphabet were among the biggest gainers in tech stocks, while in semiconductors, investors factored in a drop in TSM and a surge in Analog Devices. Berkshire Hathaway reduced its 86% stake in TSM, causing TSM's stock price to drop more than 5%. Shares of Analog Devices rose 7 percent to a new 52-week high after the company reported quarterly earnings that topped Wall Street expectations for both revenue and profit. Roblox pre-orders surged as the video game company reported better-than-expected fourth-quarter results, with earnings surging 26%. Airbnb, meanwhile, issued upbeat guidance as healthy travel demand underpinned bookings, topping revenue and net profit expectations for its quarterly results.

U.S. retail sales jump 3% in January

U.S. retail sales unexpectedly rose 3% month-on-month in January, the largest increase since March 2021, well above market expectations of 1.8%. That followed a 1.1 percent drop in December. Food services and alcohol grew 7.2 percent, the most of any major industry. Auto and parts dealers rose 5.9 percent, and furniture and home furnishings stores rose 4.4 percent.

Hong Kong Stock Connect had a net inflow of HK$3.91bn on Wednesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$3.2bn; followed by HSCEI ETF (2828). Tencent (700) recorded the largest net outflow at HK$0.48bn, followed by ICBC (1398).

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Hua Hong Semi
01347

Hua Hong Semiconductor achieved 19.3% yoy revenue growth in 4Q22, and flat qoq even in traditional low season. Gross profit margin continued to increase and increased by 1 percentage point on a quarterly basis, to 38.2%, mainly due to the ASP increases. Revenue from discrete was US$213.0 million, an increase of 21.3% yoy, mainly due to increased demand for IGBT and super junction products. Intensified Sino-US friction continues to encourage Chinese customers to increase foundry placements at Chinese foundries, including Hua Hong. As for the capacity utilization rate, Hua Hong maintains a capacity utilization rate of 103.2% for over-capacity production. The group stated that in 2023 12-inch capacity target will increase from 65,000 pieces per month to 95,000 pieces per month, an increase of cc. 15.3%. It also pointed out that the construction of the new plant will be initiate in due course. Currently, Hua Hong's production capacity utilization rate is at full capacity. Short-term performance maybe potentially affected by the bottleneck. But, in the long-run, there is room for revenue growth driven by the increase in production capacity and ASP. Target price: $40; Stop- Loss price: $29.

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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