Hang Seng raised 2.0%
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This week, the Hang Seng Index rose by 2.0%, and the Hang Seng Tech Index increased by 0.7%. Despite no significant positive news over the weekend, market sentiment improved as multiple favorable developments were gradually released throughout the week. Domestically, July’s financial data showed signs of weakness, with retail sales growth falling short of expectations. On the international front, the Bank of Japan may adjust its interest rate policy and enhance market support measures, while strong U.S. economic data for July effectively alleviated concerns about a global economic recession. Additionally, major stocks such as Tencent, Alibaba, and JD.com released their earnings reports, with Tencent and JD.com significantly exceeding expectations, leading to increased investor interest. Driven by these positive factors, the Hong Kong stock market experienced a strong rebound on Friday, marking its second consecutive week of gains and continuing the upward trend. Next week, with earnings reports from Xiaomi and Baidu anticipated, strong performance from these companies could further stabilize and boost the Hong Kong market.
U.S. Stock Market, as of this Thursday, the S&P 500 has risen by 3.7%, the Nasdaq has surged by 5.1%, and the Dow Jones Industrial Average has increased by 2.7%. All three indices are now above their 50-DMA. Economic Data: According to data from the U.S. Bureau of Labor Statistics, the PPI for July increased by 2.2% y/y, falling short of expectations and the previous figure. On a m/m basis, PPI rose by 0.1%, also below expectations and the prior month. The core PPI for July rose by 2.4% y/y, which is lower than both expectations and the previous figure; m/m, it remained unchanged. This represents the mildest increase in four months, exceeding expectations. Notably, the PPI report also reveals that service sector costs decreased by 0.2% m/m in July, marking the first decline this year and the largest drop since March 2023. This broad-based PPI slowdown, along with the first decline in service costs this year, could further open the door for a Fed rate cut in September. In addition, the CPI for July rose by 2.9% y/y, lower than expectations and the previous figure; core CPI increased by 3.2% y/y, meeting expectations but below the prior figure, with a m/m rise of 0.2%. Despite the y/y slowdown in core CPI, core goods deflation seems to have stalled. This marks the 50th consecutive month of rising core CPI, a record high. However, July’s core CPI has declined for the fourth consecutive month and represents the slowest growth since early 2021, potentially setting the stage for a 25-basis-point rate cut by the Fed in September. Employment: For the week ending August 10, initial jobless claims in the U.S. stood at 227,000, the lowest in five weeks and below both expectations and the previous figure, maintaining levels close to the lowest in decades. Additionally, for the week ending August 3, continuing claims were at 1.864 million, also below expectations and the previous figure.
The CSI 300 rose 0.4% this week on volume below the average and lower than the last week. The market condition was Downtrend. The index recovered slightly this week but remained below all key moving averages. The turnover in Shanghai and Shenzhen exchanges was below RMB500 billion for three consecutive days this week, and Tuesday’s turnover was as low as RMB477.32 billion, a new low since December 24, 2019. Market sentiment is low. Support remains at the Feb. 2 low of 3108. Resistance remains at the 21DMA. M1 fell 6.6% year-on-year in July, down more than expected and the previous value. M2 rose 6.3% year-on-year, higher than the previous value but lower than expected. RMB260 billion of new RMB loans in July were lower than the expected of RMB456.1 billion and the same period last year of RMB345.9 billion. Social financing scale increased by RMB772.4 billion in July, lower than the expected of RMB1.0 trillion, but higher than the same period last year of RMB536.6 billion, and the stock of social financing scale rose 8.2% year-on-year, higher than the previous value, but lower than expected. Industrial value added in July rose 5.1% year-on-year, lower than the previous value, but higher than the expectations. Total retail sales of consumer goods rose 2.7% year-on-year, higher than the previous value, but lower than expected. Fixed asset investment rose 3.6% year-on-year in January-July, lower than the previous value and expectations. Overall, the data is not very good. U.S. PPI rose 2.2% y/y in July, lower than the previous value. CPI rose 0.2% m/m in July, unchanged from expectations. It rose 2.9% y/y, the lowest since March 2021.Core CPI rose 0.2% m/m in July, unchanged from expectations, and it rose 3.2% y/y, the lowest since April 2021.The data showed that U.S. inflation has cooled, increasing the Fed’s ability to cut interest rates. Investors are advised to remain patient and wait for the index to regain its 21DMA. Northbound outflow via the HK-China Stock Connect was RMB5.0B.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 1.8% for this week. Our Hong Kong Model Portfolio rose by 5.7% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 541.3% vs. a 14.6% down for the Hang Seng.
The best performer in our Hong Kong 33 was CHINA RUYI(00136), it’s is an investment holding company mainly engaged in content production and online streaming media business in China. The stock gained 9.7% this week. EPS rating stands at 74, RS rating of 86, and A/D rating of B-.
Our Hong Kong Market Status are on a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index managed to reclaim the 200-DMA this week. However, the trading volume further shrank compared to last week, indicating that large funds in the market may be adopting a cautious stance due to lingering uncertainties and are hesitant to enter the market. In terms of Southbound inflow via the HK-China Stock Connect, net inflow totaled HKD 16.583 billion this week, showing a slight increase from the previous week. Despite the index’s recovery above the 200-DMA, the subdued trading volume remains a concern. The key to sustaining the rebound will be whether the index can maintain its position above the 200-DMA while experiencing a meaningful increase in trading volume. Historical experience suggests that a rebound on low volume often fails to restore market confidence and support a long-term uptrend. Investors should remain cautious and avoid blind following. It is advisable to focus on stocks that have exceeded earnings expectations and demonstrate strong technical performance.
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published on August 16, 2024