Hang Seng fell 6.3%
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This week, the Hang Seng Index plummeted by 6.3%, while the Hang Seng Tech Index dropped sharply by 7.3%. Amid a combination of multiple adverse factors, the Hong Kong stock market has shown a pressured downtrend. Firstly, global economic and political uncertainties have significantly increased, especially after Donald Trump’s election as U.S. President. The uncertainty regarding his policy direction and cabinet appointments has exerted considerable pressure on the market. At the same time, the rebound in U.S. inflation data has lowered market expectations for a Federal Reserve rate cut, further dampening investor confidence. Additionally, within the Hong Kong stock market, slowing corporate earnings growth and mounting valuation pressure have intensified the downtrend. At the same time, fluctuations in exchange rates and other macroeconomic factors have also increased market uncertainty, with the continued rise of the US Dollar Index negatively impacting the Hong Kong stock market.
Regarding the U.S. stock market, as of this Thursday, the S&P 500 index has fallen by 0.8%, the Nasdaq index by 0.9%, and the Dow Jones index by 0.5%. Despite the declines in all three major indices, they still reached new historical highs. On the macro front, data from the U.S. Bureau of Labor Statistics shows that the y/y CPI growth for October increased to 2.6%, marking a three-month high and ending a six-month decline. The monthly CPI rose by 0.2%, while core CPI increased by 0.3%, both in line with expectations. The October PPI showed a broad recovery, with the y/y PPI growth at 2.4%, higher than both expectations and the previous value; the m/m increase was 0.2%, in line with expectations and above the previous value; core PPI increased by 3.1% y/y, surpassing both expectations and the previous value; and the m/m core PPI rose by 0.3%, also above expectations and the previous value. Regarding the labor market, data from the U.S. Department of Labor shows that for the week ending November 9, the number of initial jobless claims decreased by 4,000 to 217,000, lower than both expectations and the previous value. The number of initial claims dropped to the lowest level in six months. Federal Reserve Chairman Jerome Powell stated in a recent meeting that the U.S. economy is performing “quite well,” providing the Fed with room to cautiously consider interest rate cuts. There is no rush to act, and the Fed has time to evaluate the potential economic impact of future policies from President Trump before making any decisions. As of November 14, U.S. time, the CME FedWatch Tool indicates that the market expects a 58.9% chance of an interest rate cut in December.
In terms of the A-shares market, the CSI 300 Index dropped 3.3% this week, falling below the 21-DMA. Trading volume was lower than last week but still above the 50-day average volume. The market trend remains upward, with support at the low of 3765 on October 18 and resistance at the high of 4450 on October 8. On the macro front, data released by the National Bureau of Statistics shows that China’s CPI for October increased by 0.3% y/y, below expectations and the previous value. m/m, it decreased by 0.3%, with a slightly larger decline than the previous month. PPI fell by 2.9% y/y, also lower than expectations and the previous value, while m/m, it decreased by 0.1%, with a notable narrowing of the decline. In terms of financial data, the People’s Bank of China’s official website shows that the growth of social financing and RMB loans slowed in October, with M1’s decline narrowing and M2’s growth expanding. The negative growth differential between M1 and M2 has slightly reduced. In the first ten months of this year, RMB loans increased by 16.52 trillion yuan, with the balance of RMB loans growing 8% y/y as of the end of October. The incremental social financing amounted to 27.06 trillion yuan, 4.13 trillion yuan less than the same period last year, with the social financing stock growing 7.8% y/y at the end of October. At the end of October, the broad money supply (M2) grew 7.5% y/y, up 0.7 percentage points from the end of the previous month. The narrow money supply (M1) decreased by 6.1% y/y but rebounded by 1.3 percentage points from the end of the previous month, marking the first acceleration in growth this year. In October, the weighted average interest rate on new corporate loans was about 3.5%, while the interest rate on new personal housing loans was about 3.15%, both at historic lows. In addition, the Ministry of Finance and other departments issued new tax incentives for the real estate market, including a reduction of the deed tax rate to 1% for the purchase of the first and second homes of 140 square meters or less; exemption from VAT on the sale of homes purchased for two years or more; and a 0.5 percentage point reduction in the minimum pre-levy rate for land value-added tax.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 4.7% for this week. Our Hong Kong Model Portfolio fell by 3.3% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 555.8% vs. a 4.8% down for the Hang Seng.
The best performer in our Hong Kong 33 was MARKETINGFORCE(02556), it’s the largest marketing and sales SaaS company in China. The stock gained 6.7% this week. EPS rating stands at 63, RS rating of 94, and A/D rating of A+.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the Hang Seng Index fell below both the October 17 low and the 50-DMA this week, with trading volume similar to last week, slightly below the 50-day average volume. The market condition has shifted from an uptrend to a stalled rally. The next support level is at the gap from September 25. In terms of Southbound inflows, the trend of net inflows continued this week, with a total net inflow of HKD 35.683 billion, slightly higher than last week. Overall, the market is facing significant uncertainty, with a complex and changing external environment. Multiple factors are influencing the market, making its movement difficult to predict. Therefore, investors are advised to remain calm, respond rationally, avoid blindly following trends, and focus on stocks that have exceeded earnings expectations and show strong 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 November 15, 2024