KGI Asia Commentary

2023.12.15 09:00

Hang Seng Index rose 173 points on Thursday

The Hang Seng Index rose 173 points or 1.1% to 16,402 on Thursday. HSTECH rose 12 points or 0.3% to 3,698 and HSCEI rose 22 points or 0.4% to 5,573. Daily market turnover was HK$102.2bn.

Dow closes at record high, post-Fed meeting rally continues

The Dow closed at a record high for a second day in a row on Thursday, as a rebound after the Federal Reserve raised interest rates continued to push stocks higher, even as some expressed concern that the recent gains were too big, too fast. The Dow Jones Industrial Average closed at a new all-time high, rising 158 points, or 0.43%, to 37,248.35 points. The S&P 500 rose 0.26% to close at 4,719.55 points, and the Nasdaq rose 0.19% to close at 14,761.56 points. Shares of Adobe Systems fell 7% after the computer software company issued conservative profit and revenue forecasts for 2024. Moderna shares rose more than 9% after positive experimental results for an RNA cancer vaccine developed in partnership with Merck. Rivian Automotive shares rose more than 13% after the electric-vehicle maker struck a deal with AT&T to supply commercial vans and R1 vehicles to AT&T as part of a pilot program. Occidental Petroleum rose nearly 3%, supporting the energy sector as a whole, as Warren Buffett's Berkshire Hathaway acquired nearly 10.5 million shares of the oil giant for about $588.7 million.

Jobless claims lower than expected, but retail sales unexpectedly rise

The number of people applying for unemployment benefits fell by a seasonally adjusted 19,000 to 202,000 in the week ended December 9. However, although this number is lower than economists expected, some still believe that the labor market will suffer substantial weakness in the future. However, consumers continue to show strength, with U.S. retail sales unexpectedly rising 0.3% from the previous month in November, and the holiday shopping season getting off to a brisk start.

Hong Kong Stock Connect had a net outflow of HK$9.69bn on Thursday, of which CNOOC (883) had the largest net inflow, reaching HK$0.11bn; followed by China Mobile (941). Tracker Fund (2800) recorded the largest net outflow at HK$6.6bn, followed by CSOP HS TECH (3033).

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SPDR Gold ETF
02840

As U.S. inflation and the labor market cools, the market expects interest rate cuts to begin as early as 1H24. In addition, the U.S. fiscal and trade deficits has become increasingly serious after 2022, making the U.S. dollar prone to weakening relative to other major currencies around the world. When the United States begin to cut interest rates, and the interest rate spread get narrower, gold may have more upside. However, investors should pay attention to the current market's early reaction to the Federal Reserve's interest rate cut expectations, and there is a chance that gold prices may consolidate first before rising to another peak. We estimate that gold prices may reach 2,300 by the end of next year. If investors do not want to bear company specific risk, they can pay attention to gold ETFs. Taking the SPDR Gold ETF (2840) as an example, the rolling one-year tracking error is only 0.06%, and the historical trend is close to the trend of gold prices. Target price: $1660; Stop- Loss price: $1250.

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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