KGI Asia Commentary

2024.08.22 10:00

Hang Seng Index fell 120 points on Wednesday

The Hang Seng Index closed at 17,391 points for the day, down 120 points or 0.7%. The Hang Seng Technology Index reported at 3,434 points, down 63 points or 1.8%. The HSCEI Index fell 53 points, or 0.9%, to 6,141 points. The market turnover was HK$93.8billion.

 

S&P 500 ends higher as Fed meeting minutes boost hopes of September rate cut

The S&P 500 index closed higher on Wednesday as minutes from the Federal Reserve's July meeting boosted expectations for a rate cut next month, overshadowing concerns about the economy following softer labor market data. The Dow Jones Industrial Average rose 55 points, or 0.1%, the S&P 500 rose 0.4% and the Nasdaq Composite rose 0.6%. Shares of Target Corp. rose 11% after the large retailer raised its annual profit forecast and second-quarter comparable sales exceeded expectations as consumers were attracted by low-priced groceries and necessities. By comparison, department store chain Macy's shares fell 13% after it reported quarterly revenue that fell short of market expectations as continued weakness in U.S. consumer spending hurt demand for higher-priced discretionary items. Shares of Ford Motor Co rose more than 1% after the automaker canceled plans for a three-row electric SUV and delayed the launch of its new F-150 in response to weak demand.

 

Fed minutes point to ‘likely’ rate cut coming in September

The vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the summary stated.“Some participants noted the risk that a further gradual easing in labor market conditions could transition to a more serious deterioration.” Markets are now fully pricing in a September cut.

Hong Kong Stock Connect had a net inflow of HK0.28bn on Wednesday of which Xiaomi (1810) had the largest net inflow, reaching HK$0.28bn; followed by Wuxi Bio (2269). Tracker Fund (2800) recorded the largest net outflow at HK$0.41bn, followed by China Shenhua (1088).

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China Telecom reported operating revenue of RMB268bn in 1H24, up 2.8% yoy. Service revenue reached RMB246.2bn, up 4.3% yoy, outpacing industry growth. EBITDA was RMB76.8bn, up 4.7% yoy. Net profit was RMB21.8bn, up 8.2% yoy. Industrial digitalization revenue reached RMB73.7bn, up 7.2% yoy, accounting for 30% of service revenue, up 0.8 ppts yoy. Revenue from China Telecom Cloud reached RMB55.2bn, representing a yoy growth of 20.4%. The group's interim net profit growth of 8.2% outpaced the revenue growth. The Chairman stated that the company will continue to push forward its Cloudification and Digital Transformation strategy, aiming to achieve solid revenue and EBITDA growth for the full year, while maintaining a net profit growth rate higher than the revenue growth rate. A dividend of RMB0.16 per share was declared, up 16.7% yoy. The company will gradually increase the cash dividend payout ratio to over 75% of the annual profit attributable to shareholders within three years from 2024. Target price: $5.2; Stop- Loss price: $4.3.

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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