KGI Asia Commentary

2024.08.28 10:00

Hang Seng Index rose 75 points on Tuesday

The Hang Seng Index closed at 17,874 points for the day, up 75 points or 0.4%. The Hang Seng Technology Index reported at 3,501 points, down 1 points or 0.0%. The HSCEI Index rose 27 points, or 0.4%, to 6,306 points. The market turnover was HK$91.9billion.

Dow closes at record high, focus turns to Nvidia earnings

The Dow closed at a record high on Tuesday, although investors remained cautious as they awaited Wednesday's earnings report from chip-making giant Nvidia. The Dow Jones Industrial Average rose 0.02% (9 points) to close at a record 41,250.50 points. The S&P 500 rose 0.2% and the Nasdaq gained 0.2%. Nvidia's quarterly earnings, due after the market close on Wednesday, are expected to serve as a gauge of whether the artificial intelligence-fueled tech rally has room to continue or whether it will soon run out of steam. In addition to chips, Apple announced late Monday that Luca Maestri will resign as chief financial officer starting in early 2025, which limited Apple's gains. At the same time, the countdown to Apple's product launch scheduled for September 9 continues to be the focus of investors, with some bullish on technology stocks predicting that the technology giant's upcoming new iPhone may trigger a historic upgrade cycle. Paramount shares fell 7% after billionaire Edgar Bronfman Jr pulled out of a fight for control of the media conglomerate, potentially allowing Skydance Media to acquire the media without a bid control of the group.

Consumer confidence rises as recession fears ease

The Conference Board reported on Tuesday that U.S. consumer confidence hit a six-month high in August as fears of a recession receded. In addition, 2Q GDP data will be released on Thursday, and PCE data, the Fed's preferred inflation measure, will be released on Friday. Traders unanimously predict the Fed will cut interest rates by at least 25 basis points on September 17-18, according to data from CME Group's FedWatch Tool.

Hong Kong Stock Connect had a net outflow of HK2.87bn on Tuesday of which Tracker Fund (2800) had the largest net inflow, reaching HK$0.11bn; followed by CCB (939). Meituan (3690) recorded the largest net outflow at HK$0.08bn, followed by CNOOC (883).

Recommended Stocks

Capture the moment and trade with KGI Asia's insights

Stocks

Recommended

Stocks

Recommended

HSBC
00005

HSBC's 2Q24 revenue was $16.5 billion, down $200 million yoy, but slightly better than the market expectation. The Board has approved a second interim dividend of $0.10 per share, in line with expectations. According to management, the target payout ratio for this year's dividends is 50%, and it is preliminarily expected that the third and fourth interim dividends will be $0.10 and $0.21 respectively (excluding any special dividends) after the first and second interim dividends of $0.10 each. At the current price, the dividend yield is attractive. The group will also undertake a share buyback of up to $3 billion, expected to be completed within three months. This buyback amount is the upper end of market expectations. We believe that the high dividend and ongoing buybacks will support the stock's performance. Looking ahead, the Group CEO expressed confidence in achieving revenue growth even in a rate-cutting environment, and provided new guidance that the average return on tangible equity will be around 15% in 2025 (the same as this year). This suggests that even if the US resumes its rate-cutting cycle in September, management is confident in the overall operations and performance. With two consecutive quarters of strong performance, coupled with factors such as high dividends and buybacks, investors can consider this stock during pullback. Target price: $74; Stop- Loss price: $63.

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.

The materials contained herein are provided by KGI Asia Limited ("KGI") for information only. While such materials are based on or derived from sources believed to be reliable, KGI makes no representation or warranty (express or implied) as to their accuracy or reliability. Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or solicitation of an offer to buy or sell any securities or investments. KGI and its officers, employees, agents and affiliates may have interests in the securities or investments covered herein and accept no liability whatsoever for any loss or consequence whatsoever (whether direct or indirect) resulting from any use of or reliance by you on such materials.