Daily Investment Strategy
Daily focus：Tencent（700）
The U.S. Department of Defense has announced the inclusion of Tencent Holdings (00700) and other companies such as CATL in the Section 1260H list, which identifies companies collaborating with the Chinese military. In a statement, Tencent asserted that the Department of Defense's decision to include the company on the list of firms allegedly assisting Beijing's military is clearly a mistake, emphasizing that it is neither a military enterprise nor a supplier to the military. Unlike export controls or other measures, being on this list does not impact their business. Nonetheless, Tencent plans to work with relevant U.S. authorities to resolve this misunderstanding. Notably, companies previously listed under the 1260H have successfully been removed after being included. Tencent is currently collaborating with U.S. authorities to address this issue. There is a possibility that some investors may sell off shares as a precaution, so the follow-up investment decisions should be based on individual risk tolerance and portfolio weightings. In terms of share price performance, Tencent has fallen below its medium-term upward trend and all major moving averages, indicating share price softness. In the short term, the share price may fluctuate within a price range of approximately HK$350-400 (the price range during May to September 2024). Future impacts will depend on whether the Trump administration imposes an investment ban on Tencent (though this risk appears low currently), sanctions, or fines. In the short term, there may be selling pressure; however, Tencent's fundamentals remain unchanged: (1) a rich game pipeline; (2) promising monetization capabilities in advertising; and (3) long-term potential in AI. We will closely monitor developments of the situation.
Rising U.S. Treasury yields weaken tech stocks
The S&P 500 ended sharply lower on Tuesday as rising U.S. Treasury yields weighed on technology stocks and economic data showed concerns about rising inflation, curbing bets on further interest rate cuts by the Federal Reserve. The Dow fell 177 points, or 0.4%; the S&P 500 fell 1.1%; the Nasdaq Composite fell 373 points, or 1.9%. In addition to technology stocks, U.S. President-elect Trump denied media reports that the United States would adopt a less aggressive tariff system than previously feared, which curbed the rise of the stock market to a certain extent. Trump denied a Washington Post report that he would impose trade tariffs only on certain industries, rather than the broad range of tariffs he promised during the campaign.
Hong Kong Stock Connect had a net inflow of HK$12.9bn on Tuesday of which Tencent (700) had the largest net inflow, reaching HK$13.9bn; followed by SMIC (981). Tencent (2800) recorded the largest net outflow at $3.22bn, followed by HSCEI ETF (2828).
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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