KGI Asia Commentary

2024.08.14 10:00

Hang Seng Index rose 62 points on Tuesday

The Hang Seng Index closed at 17,174 points for the day, up 62 points or 0.4%. The Hang Seng Technology Index flat at 3,429 points. The HSCEI Index rose 19 points, or 0.3%, to 6,049 points. The market turnover was HK$70.8 billion.

 

S&P 500 jumps, yields fall as inflation cools

U.S. stocks rose on Tuesday on further signs that inflation is cooling, raising the possibility that the Federal Reserve will cut interest rates as early as next month, sending U.S. Treasury yields lower. The Dow Jones Industrial Average rose 389 points, or 1%, the S&P 500 rose 1.5% and the Nasdaq rose 2.3%. Despite the lowered forecast, Home Depot's stock price rose more than 1%. The retailer lowered its full-year forecast, citing weakening consumer demand for home improvement projects. Chipotle Mexican Grill shares fell 8% after Starbucks appointed Chipotle CEO Brian Niccol to replace Laxman Narasimhan, who was immediately fired, as the new CEO starting September 9. Starbucks Corp. has been the target of activist investors pushing for changes at the coffee chain, and its shares jumped 23% that day. Some on Wall Street remain unconvinced, pointing out that Chipotle has never engaged in menu innovation or marketing of any kind. Dell Technologies shares rose 5% after Barclays upgraded the stock to overweight from underweight, following a recent pullback. Alphabet Inc's Class A shares rose 1% as the company unveiled its artificial intelligence-based Pixel smartphone.

 

PPI inflation cooled in July

Data released on Tuesday showed that the producer price index (PPI) rose 0.1% in July from the previous month, lower than economists' expectations of 0.2%. The annual growth rate was 2.2%, compared with expectations of 2.3%. Excluding the volatile food and energy components, core PPI was unchanged from the previous month, while expectations were for a 0.2% rise. Annually was 2.4%, compared with the forecast of 2.7%. U.S. Treasury yields fell sharply as investors bet on a rate cut in September.

Hong Kong Stock Connect had a net inflow of HK1.91bn on Tuesday of which China Mobile (941) had the largest net inflow, reaching HK$0.52bn; followed by Tencent (700). Tracker Fund (2800) recorded the largest net outflow at HK$0.78bn, followed by HSCEI ETF (2828).

Recommended Stocks
Capture the moment and trade with KGI Asia's insights
Stocks
Recommended
Stocks
Recommended

Market Expects Tencent's 2Q24 Revenue at RMB161.3bn, up 8.0%yoy and 1.1% qoq. Net Profit is expected to grow 29.5%yoy to RMB48.63bn. Market is generally positive on the prospects of Tencent's domestic gaming business, as well as the strong advertising growth outlook. Benefiting from a revenue mix shift towards higher-margin businesses and cost control, the gross profit margin is expected to improve to 52.72% (Q2 2023: 47.48%; Q1 2024: 52.6%). Tencent's domestic gaming business is expected to see a recovery in the second half, benefiting from the launch of "Dungeon & Fighter Mobile". Additionally, Tencent Video's total user viewing time grew over 80%yoy in 1Q24. While Tencent Video's GMV is growing, it still has significant room for further development compared to the trillions of Kuaishou and Douyin. Accelerating the commercialization of Tencent Video could inject new momentum into the company. Target price: $450; Stop- Loss price: $329.

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.