KGI Asia Commentary

2023.03.17 09:00

Hang Seng Index fell 335 points on Thursday

The Hang Seng Index fell 335 points or 1.7% to 19,203 on Thursday. HSTECH fell 54 points or 1.4% to 3,811 and HSCEI fell 77 points or 1.2% to 6,482. Daily market turnover was HK$111.3bn.

Dow jumps more than 300 points as banks step in to aid First Republic

The U.S. stock market rose on Thursday. After numbers of banks stated that they would assist the First Republican Bank in the banking crisis, Wall Street became more and more optimistic. The Dow Jones Industrial Index rose 371.98 points to close at 32,246.55 points, an increase of 1.17%. The S&P 500 index rose 1.76%to close at 3,960.28 points. The Nasdaq rose 2.48%to 11,717.28 points. Credit Suisse announced that it would borrow from the Swiss Central Bank to more than 50billion Swiss francs (US$53.68 billion) through covered loan facility and a short-term liquidity facility, and bank stocks rebounded. After a few days of turmoil, the banking industry is relatively calm, restore investor bets on the Federal Reserve pursuing further rate hikes next week.

Weekly US jobless claims drop sharply

According to data from the US Department of Labor, in seasonally adjusted terms, the number of people applying for initial unemployment claims as of March 11 was reduced by 20,000 to 192,000. In the week of March 4, the number of continuing jobless claims decreased by 29,000, reaching 1.684 million.

Major banks rescue First Republic

First Republic Bank rose 10% to promote the overall rise in financial stocks as a group of major Wall Street banks pumped billions in deposits into this troubled bank. Bank of America, Citigroup, Morgan Chase, and Wells Fargo said they will inject $5 billion in uninsured deposits into the First Republic Bank, respectively. Goldman Sachs and Morgan Stanley each made an uninsured deposit $2.5 billion. BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank made an uninsured deposit of $1 billion. Eleven large banks injected a total of $30 billion in deposits.

Hong Kong Stock Connect had a net inflow of HK$2.06bn on Thursday, of which Tencent (700) had the largest net inflow, reaching HK$0.42bn; followed by ICBC (1398). CNOOC (883) recorded the largest net outflow at HK$0.37bn, followed by East Buy (1797).

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China Resources Beer
00291

Beer stocks, like other consumer stocks, have enjoyed a recovery since the end of last year, when restrictions on the movement of people across regions were lifted and channels such as restaurants and night clubs gradually recovered. At the beginning of the year, China Daily published an article titled "Night-time economy can help boost consumption". The development of the night economy not only meet the people's growing needs for a better life, but also have a significant role in stimulating domestic demand, prospering the market, and creating jobs. Relevant remarks reflect that mainland China has a positive attitude towards the beer industry, and beer stocks can become one of the options for investors to capture the rebound in consumption in the mainland. The pandemic in 2022 somehow dented beer sales in China. Nevertheless, it is forecast that the premiumization will continue, which will send the product ASP higher. In 1H22, the sales volume of the sub-premium beer segment of China Resources Beer was approx.1,142,000 kiloliters, up 10% YoY. Looking ahead, the company will continue to focus on Heineken, pure draft and SuperX, while exploring further possibilities in the "baijiu" liquor segment. China Resources Beer has set a goal of 4 million kiloliters by 2025 for its high-end lines. Also, the product ASP remains at relatively low levels when compare to peers. We see the increase in both ASP and sales volume to continue in the coming future. Target price: $73; Stop- Loss price: $58.

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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