Hang Seng fell 2.1%
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This week, the Hang Seng Index fell by 2.1%, and the Hang Seng Tech Index dropped by 2.9%. Although several ministries held press conferences over the weekend to introduce policies aimed at stabilizing growth, these failed to meet market expectations. Meanwhile, tensions in the Middle East, the Korean Peninsula, and the Taiwan Strait, coupled with the continued depreciation of the renminbi, cautious expectations of future Fed rate cuts, and weaker-than-expected import and export data, all contributed to the Hang Seng Index’s four-day decline earlier in the week. However, the Hong Kong stock market saw a turnaround on Friday after the central bank governor, speaking at the Financial Street Forum Annual Conference, mentioned that before year-end, the reserve requirement ratio could be further reduced depending on market liquidity conditions, with the Loan Prime Rate (LPR) set to be lowered as well when announced on the 21st. Additionally, during an inspection tour in Hefei’s Binhu Science City, the General Secretary emphasized that advancing China’s modernization requires technology to take the lead. Buoyed by these positive signals, Hong Kong stocks surged on Friday.
As of this Thursday, the U.S. stock market saw the S&P 500 rise by 0.5% and the Dow Jones increase by 0.9%, both setting new all-time highs. The Nasdaq edged up by 0.2%, remaining about 1.6% below its historical peak. On the macroeconomic front, data from the Bureau of Labor Statistics showed that the September PPI remained flat m/m, lower than expected and previous figures, indicating further easing of inflation. Data from the U.S. Census Bureau showed that retail sales in September grew by 0.4% m/m, exceeding expectations and prior numbers, but fell to 1.7% y/y, the lowest level since January. In terms of employment, data from the U.S. Department of Labor showed that for the week ending October 12, initial jobless claims stood at 241,000, down by 19,000 from the previous week, beating expectations. Continuing claims surged to 1.87 million, marking the highest level since July. According to the CME FedWatch Tool, market traders are currently pricing in a 93% probability of a 25-BP rate cut at the next Fed meeting, with only a 7% chance of no change.
The CSI 300 rose 1.0% this week on volume above the average but lower than the last week. The market condition was Confirmed Uptrend. The stock surged again this Friday, with turnover once again topping RMB2.0 trillion. Resistance remains at the Oct. 8 high of 4,450, and support remains at the May 20 high of 3,703. China’s CPI increased 0.4% y/y in September, lower than expected and previous value. PPI fell 2.8% y/y, the drop higher than expected and previous value. 24Q3 GDP grew 4.6% y/y, unchanged from expectations and slightly lower than the previous value. M1 declined 7.4% y/y in September, lower than expected, while M2 increased 6.8% y/y, higher than the previous value and expectations. New RMB loans in September amounted to RMB1.6 trillion, lower than expectations but higher than the previous value. Social financing scale increased by RMB3.8 trillion in September, higher than the previous value and expectations, and the stock of social financing scale rose 8% y/y, lower than the previous value. The value added of industry above designated size rose 5.4% y/y in September, higher than the expectations and the previous value. Fixed-asset investment in the January-September period increased 3.4% y/y, the same as the previous value. Total retail sales of consumer goods in September rose 3.2% y/y, higher than the expectations and the previous value. The economic and financial data in September was generally good. Market sentiment was high this week as a series of policy rules began to materialize. The U.S. presidential election enters a late stage. Geopolitical risks in the Middle East rise. Investors are advised to continue to focus on technically and fundamentally sound stocks and on the third quarter earnings season.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.4% for this week. Our Hong Kong Model Portfolio fell by 1.8% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 604.3% vs. a 2.0% up for the Hang Seng.
The best performer in our Hong Kong 33 was CTIHK(06055), it’s a wholly-owned subsidiary of China National Tobacco Corporation, responsible for capital operations and international business expansion. The stock gained 13.7% this week. EPS rating stands at 97, RS rating of 96, and A/D rating of A.
Our Hong Kong Market Status are on an Confirmed Uptrend.
From a technical analysis perspective, the Hang Seng Index successfully closed above the 5-DMA and 21-DMA this Friday. Although trading volume increased compared to Wednesday and Thursday, it remained slightly below the levels seen on Monday and Tuesday. In terms of the Southbound inflow via the HK-China Stock Connect, there was a continued net inflow this week, totaling HKD 24.42 billion, a significant increase compared to previous weeks. Boosted by favorable news on Friday, market sentiment turned more bullish. However, the tightening trend in global liquidity and rising geopolitical risks should not be overlooked. Additionally, as companies begin to release their third-quarter earnings, the market may face further volatility. Overall, while the market rebounded on Friday due to positive factors, the external environment remains complex and uncertain, suggesting potential market fluctuations near support levels. Investors are advised to stay calm, act rationally, avoid chasing trends blindly, and focus on stocks with stronger-than-expected earnings and solid technical performance.
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Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
published on October 18, 2024