KGI Asia Commentary

2023.02.28 09:00

Hang Seng Index fell 66 points on Monday

HSI opened 189 points lower, then rose 76 points to reach a peak of 20,086, and then fell again. It fell 66 points or 0.3% to close at 19,943 today; HSTECH fell 20 points or 0.5% to close at 3,989. HSCEI fell 33 points to close at 6,670. The market's full-day turnover totaled HK$112.4bn. It was rumored that BYD (1211) dealers in some regions had promotional activities. Market worried that BYD's profitability would be suffered. BYD's share price fell 3.4%. Catering stock Haidilao (6862) predicts that last year's profit will not be less than RMb1.3bn, the stock price rose 13.7%.

Durable goods orders excluding non-defense capital growth higher than consensus

The U.S. durable goods orders fell by 4.5% in January, a larger-than-expected 3.6% drop and the largest drop since April 2020. The sluggish domestic manufacturing industry has led to a decline in demand for ordered goods, but non-defense capital goods orders excluding aircraft increased by 0.8% MoM, which was significantly different with the consensus of -0.1% growth. This may imply that domestic manufacturing industry continues to invest in capital. The Manufacturing started to beoptimistic that the economy may not be worse than expectation. The subsequent rebound in the manufacturing PMI in February is one of the evidences.

The three major U.S. stock indexes rebounded on Monday. The Nasdaq rose 72 points, or 0.63%, to 11,466; the Dow Jones rose 72 points, or 0.22%, to 32,889. The S&P 500 rose 12 points, or 0.31%, to close at 3,982.

Chinese Gov. continue to tighten short video restriction

The China NRTA continue to tighten the development of short videos. NRTA held a meeting on 22 February to study strengthening the management of short videos. The key point is that the algorithm management needs to be implemented to promote the healthy development of short videos. It is believed that the intervention of the Chinese government may require these short video platform companies, such as TikTok or Kuaishou, to modify their algorithms, thereby affecting the number of contacts of the short video.

Hong Kong Stock Connect had a net inflow of HK$6.05bn on Monday, of which Tencent Holdings (0700) had the largest net inflow of HK$1.5bn; followed by Tracker Fund (2800). BYD (1211) recorded the largest net outflow of HK$200mn; followed by China Telecom (0728).

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AK Medical
01789

AK Medical is principally engaged in the design, development, production and sales of orthopedic implants. Recently the Company issued profit alert. The Board expects to record an increase in revenue by over 35% yoy for FY22; and expects to record a significant increase in net profit attributable to Shareholders by over 100%. The increase in revenue was primarily due to the strong demand of the Group’s products in hospitals caused by the speeding up of import substitution as a result of the implementation of volume-based procurement since April 2022 in China. Meanwhile, the extensive product lines of the Group, including 3D-printed products, have effectively met the needs of a differentiated market and further contributed to the growth of sales revenue. The effective cost control of the Company contributes to the increase in net profit. Despite a reduction in the ex-factory price of the Company’s product lines as a result of the VBP policy, the volume of operations in the hospitals increased rapidly. At present, among all the artificial joints purchased by medical institutions, most of them are on the VBP list, indicating that the medical institutions have fulfilled their commitment to preferentially purchase and use the selected products, so that patients can really have the medical treatment at a lower price. At present, the overall localization rate of high-value orthopedic consumables in the mainland remain low, and leading companies are expected to fully benefit from the trend of increasing industry concentration and domestic utilization and therefore achieve long-term steady growth. Target price: $11.6; Stop- Loss price: $9.

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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