KGI Asia Commentary

2023.04.21 09:00

Hang Seng Index rose 29 points on Thursday

The Hang Seng Index rose 29 points or 0.1% to 20,396 on Thursday. HSTECH fell 3 points or 0.1% to 4,098 and HSCEI rose 6 points or 0.1% to 6,895. Daily market turnover was HK$101.5bn.

U.S. stocks fall on Thursday amid mixed corporate earnings

Stocks fell on Thursday as the market reacted to mixed corporate earnings reports, including Tesla's disappointing results. Investors also assessed the latest data showing a contraction in the economy. The Nasdaq Composite Index fell 0.8% to close at 12,059.56 points; the Dow Jones Industrial Average fell 110.39 points, or 0.33%, to close at 33,786.62 points; the S&P 500 Index fell 0.6% to close at 4,129.79 points. Shares of electric car maker Tesla fell 10% after the company reported earnings that missed market expectations as a series of recent price cuts weighed on profit margins. Tesla's willingness to sacrifice profit margins in exchange for long-term demand growth has sparked fears of a price war in the industry, sending shares of other automakers including General Motors Co and Ford Motor Co down about 3%. Shares of Seagate Technology fell more than 9% after the company issued a disappointing forecast, citing weak demand. Shares of Dow main component AT&T Inc tumbled more than 10% as investors worried about the company's ability to meet its forecasts, amid mixed quarterly results and lower-than-expected revenue. About 16% of S&P 500 companies have reported results so far, and about 76% of those companies have topped earnings per share estimates, according to FactSet data on Thursday. The market itself is preparing for a decline in earnings. And some investors are starting to be alert seeing the generally weaker earning guidance.

U.S. initial jobless claims rise to 245,000 vs. 240,000 expected

Weekly data from the Labor Department on Thursday showed 245,000 initial jobless claims for the week ended April 15. The reading followed last week's 240,000 (revised from 239,000) and topped expectations for a reading of 240,000. Continuing claims rose by 61,000 in the week ended April 8 to the highest level since November 2021.

Hong Kong Stock Connect had a net inflow of HK$5.14bn on Thursday, of which SMIC (981) had the largest net inflow, reaching HK$0.78bn; followed by Meituan (3690). Tracker Fund (2800) recorded the largest net outflow at HK$2.8bn, followed by HSCEI ETF (2828).

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China Railway
00390

The amount of new contracts of the Group was RMB3,032.39bn in FY22, representing a yoy increase of 11.1%. The amount of new contracts in the domestic business amounted to RMB2,848.61 billion, and the amount of new contracts in the overseas business amounted to RMB183.78 billion, representing a yoy increase of 10.5% and 21.1% respectively. Apart from the traditional business, the Group concentrated on water conservancy and hydropower, ecological environmental protection, and clean energy as the “second curve” business to expand the market scale and gain competitive advantages. During the Reporting Period, the amount of new contracts of the second curve business reached RMB301.892 billion, representing a yoy increase of 81.18%. As of the end of the Reporting Period, the amount of the Group’s contract backlog was RMB4,931.10 billion, representing an increase of 8.5% from the end of 2021. With the slowing growth of the global economy, China has to put more focus on infrastructure and consumption growth in order to boost the economy. China is giving top priority to stabilizing growth. Fiscal policy will be more effective and fiscal expansion will be further intensified. Further expansion of the areas of investment and scope of capitalization of the special-purpose bonds is expected to continue. In fact, the “second curve” business of China Railway is generating more revenue and opportunities for the Company. Target price: $7; Stop- Loss price: $5.2.

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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