Hang Seng raised 2.8%
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This week, the Hang Seng Index rose by 2.8%, and the Hang Seng Tech Index increased by 5.2%. Despite no positive news over the weekend, the gains this week were mainly driven by significant rises on Thursday and Friday. Thursday’s increase was primarily due to the containment of short-selling forces, with the China Securities Regulatory Commission approving the suspension of margin financing for securities lending from July 11 and requiring the settlement of existing contracts by September 30. Friday’s surge was driven by unexpectedly subdued June inflation data in the United States, thereby increasing market expectations of a Federal Reserve interest rate cut in September. Next week, attention will be on the 20th Central Committee’s Third Plenary Session to see if any economic stimulus policies will be announced.
At U.S. Market, as of this Thursday, the S&P 500 index rose slightly by 0.3%, while the Nasdaq index dipped slightly by 0.4%, with both indices reaching new all-time highs again. Meanwhile, the Dow Jones index climbed by 1.0%, now less than 1% away from its historical peak. On the macroeconomic front, the U.S. June CPI rose 3% y/y, below market expectations and the previous figure; it decreased by 0.1% m/m, also below expectations and the previous figure, marking the first negative growth since May 2020. The core CPI for June increased by 3.3% y/y, also below market expectations and the previous figure, reaching the lowest growth rate since April 2021; it only rose by 0.1% m/m, again below expectations and the previous figure, marking the smallest increase since August 2021. After the release of this data, the probability of the Federal Reserve cutting interest rates in September has surged to over 80%. Fed Chair Jerome Powell also stated that there is no need to wait for inflation to fall below 2% before cutting rates and that the timing of rate cuts is now a greater focus. In the labor market, the U.S. added 206,000 non-farm jobs in June, slowing from May, with April and May figures being significantly revised down. The unemployment rate rose to 4.1%, the highest in two and a half years. Average hourly earnings grew by 3.9% y/y, matching expectations, and falling below 4% for the first time since 2021. Additionally, the initial jobless claims for the week ending July 6 totaled 222,000, below market expectations and the previous figure; the number of continuing claims for the week was 1.852 million, also below market expectations and the previous figure.
The CSI 300 rose 1.2% this week on volume above the average and higher than the last week. The market condition was Rally Attempt. The index rallied strongly this week and is trying to break above the 21DMA. Support lies at the July 9 low of 3,385. June CPI rose 0.2% y/y, lower than the previous value and expectations. June PPI fell 0.8% y/y, the rate of decline continued to narrow. M1 declined 5.0% year-on-year in June, down more than the previous value. M2 rose 6.2% year-on-year, lower than the previous value and expectations. New RMB loans in June were 213 billion, higher than the previous value. The social financing scale increased by RMB3298.2 billion in June, higher than the previous value, the stock of the social financing scale rose 8.1% year-on-year, lower than the previous value and the expected. Financial data for June was unremarkable. On July 5, the “Opinions on Further Improving the Comprehensive Punishment and Prevention of Financial Counterfeiting in the Capital Market” was released, increasing the punishment for counterfeiting and further standardizing the market order. The China Securities Regulatory Commission has approved the suspension of Securities Financing Transactions by China Securities Finance from July 11th. Existing Securities Financing Transactions contracts will be settled before September 30th, further restricting short selling and boosting market sentiment. U.S. CPI rose 3.0% y/y in June, lower than the previous value, and fell 0.1% m/m, the first m/m decline since May 2020.Core CPI rose 3.3% y/y in June, lower than the previous value, and rose 0.1% m/m, the smallest gain since August 2021.206,000 new nonfarm payrolls were added in June, lower than the previous value. New nonfarm payrolls in May were revised lower to 218,000 from 272,000, and April was revised down to 108,000 from 165,000. The data showed that inflation slowed further and the labor market cooled. Federal Reserve Chairman Powell testified in the US Congress that there is no need to wait for inflation to drop to 2% before starting to cut interest rates, further strengthening the Fed’s expectation of rate cuts. With earnings season underway, investors are advised to focus on stocks with good performance and technicals. Follow-up attention is the twentieth session of the Third Plenary Session, which will be held in mid-July. Northbound inflow via the HK-China Stock Connect was RMB15.9B.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 0.6% for this week. Our Hong Kong Model Portfolio rose by 2.1% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 566.2% vs. a 10.3% down for the Hang Seng.
The best performer in our Hong Kong 33 was KB LAMINATES(01888), it’s a global leading manufacturer of copper clad laminates. The stock gained 6.8% this week. EPS rating stands at 76, RS rating of 94, and A/D rating of A+.
Our Hong Kong Market Status are on a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index showed strong gains in the last two days of this week, particularly with a gap-up on Friday. However, there was no significant increase in trading volume. Currently, the index is facing resistance from the 50-DMA, and it remains to be seen if there will be sufficient trading volume to break and sustain above this average. Regarding the Southbound inflow via the HK-China Stock Connect, there was a continuation of net inflows this week, totaling HK$7.336 billion, marking the 22nd consecutive week of net inflows, though recent weeks have shown a noticeable decline in inflow amounts. Given the current market uncertainties, investors should remain calm and avoid blindly following trends. At the same time, it is advisable to 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 July 12, 2024