KGI Asia Commentary

2023.01.04 09:00

Hang Seng Index rose 363 points on Tuesday

The Hang Seng Index rose 363 points or 1.8% to 20,145 on Tuesday. HSTECH rose 104 points or 2.5% to 4,233 and HSCEI rose 129 points or 1.9% to 6,833. Daily market turnover was HK$120.6bn.

U.S. stocks end lower on first trading day of 2023, dragged by Apple and Tesla

The earlier negative sentiment could extend into 2023 as the market believes Fed will continue raising interest rates in the coming months, fueling fears that the U.S. economy could slip into a recession. The S&P 500 fell 0.40% to close at 3,824.14. The Dow Jones Industrial Average fell 10.88 points, or 0.03%, to 33,136.37, with Boeing shares offsetting losses. The Nasdaq Composite fell 0.76% to 10,386.99. Apple shares fell 3.7%, with market cap closing at just under $2 trillion for the first time since 2021. Meanwhile, shares of electric-car maker Tesla Inc (TSLA) fell more than 12% on Tuesday after the company reported lower-than-expected quarterly and full-year deliveries.

Former New York Fed chief: Recession ‘pretty likely’ in US

“A recession is pretty likely just because of what the Fed has to do,” Former Federal Reserve Bank of New York President William Dudley said in an interview with Bloomberg on Tuesday. “But what’s different this time I think is that if we have a recession, it’s going to be a Fed-induced recession and the Fed can end the recession by subsequently easing monetary policy.” Economic data released on Tuesday supported the chances of a recession. U.S. manufacturing contracted in December at the worst pace since Covid-19 began, as demand remained subdued and production sluggish. The S&P Global U.S. manufacturing PMI fell to 46.2 in December from 47.7 in November, the lowest level since May 2020. Wednesday will be an important day, with the release of JOLTS in the morning (US time) and the minutes of the latest Fed meeting on interest rates in the afternoon (US time).

Hong Kong Stock Connect had a net inflow of HK$4.25bn on Tuesday, of which Tencent (700) had the largest net inflow, reaching HK$1.58bn; followed by China Mobile (941). Meituan (3690) recorded the largest net outflow at HK$0.72bn, followed by Tracker Fund (2800).

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Wharf REIC
01997

Hong Kong will implement the first phase of border reopening with the mainland as early as Jan 8. Retail sales in Hong Kong are expected to rebound gradually. Having premium quality properties in prime locations in Hong Kong, Wharf REIC is regarded as one of the beneficiaries. Hong Kong's retail sales fell 2.6% in the first half of FY22, which was shrouded by the 5th wave of COVID-19 before the easing of social distancing measures and distribution of Government’s consumption vouchers in the second quarter. Prompt investment by the Group’s malls in sales-driven marketing campaigns post 5th wave was rewarded by a rapid revival in foot traffic and spending sentiment. Among its properties, the occupancy remained at 93% at the end of June 2022 for Harbour City. It is believed that shopping malls will launch more promotional activities to attract tourists, after the relaxation of border measures. The group's interim revenue fell by 17% to HKD6.2 billion, mainly due to lower development properties recognition by listed subsidiary Harbour Centre Development Limited. Operating profit is stable and up 0.4% to HKD4.4 billion, despite the fall in revenue, attributable to effective cost management. The underlying net profit increased by 3% to 3.3bn, but including the revaluation deficits of IP of HKD5.0bn, the Group recorded a loss of HKD1.4bn attributable to equity shareholders. IP assets were stated at HKD238.2bn based on independent valuation, in which Harbour City was valued at HKD160bn and Time Squares at HKD50.2bn. If the outlook of rental market turns more optimistic, valuations may rise and benefit rental stocks. Target price: $56; Stop- Loss price: $43

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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