Hang Seng fell 1.3%
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This week, the Hang Seng Index fell by 1.3%, and the Hang Seng Tech Index dropped by 0.8%. The Hang Seng Index displayed a consolidating trend this week. On the news front, the Federal Reserve raised interest rates by 25 basis points as expected, but its latest released dot plot indicated that decision-makers expect only two rate cuts next year, far below market expectations. This had some impact on the market, though the overall disruption remained limited. In addition, the National Bureau of Statistics released the November economic data, which showed that the combined effects of macroeconomic policies continue to take hold, with industrial and service sectors growing steadily, employment and prices remaining stable, social expectations effectively boosted, and new types of productive forces advancing steadily. The national economy has continued the recovery trend seen since September.
In the U.S. stock market, as of this Thursday, the S&P 500 and Dow Jones indices fell by 3.0% and 3.4%, respectively, both breaking below their 50-DMA. The Nasdaq index, although down 2.8%, still hit a record high earlier this week. On the macroeconomic front, the U.S. Bureau of Economic Analysis released its third revision, showing that the annualized q/q growth rate of real GDP for Q3 was 3.1%, higher than expected and the previous estimate. Consumer spending was revised up to 3.7%, the fastest pace since early 2023, primarily driven by increased service spending. The annualized q/q growth rate of the core personal consumption expenditures (PCE) price index for Q3 was 2.2%, exceeding expectations and the prior figure. Meanwhile, the U.S. current account deficit for Q3 was $310.9 billion, higher than expected and the previous reading. According to S&P Global data, the preliminary December reading for the U.S. Markit Manufacturing PMI was 48.3, below expectations and the prior value; the Services PMI was 58.5, the highest level since October 2021, exceeding expectations and the previous reading; and the Composite PMI was 56.6, the highest since March 2022, also above expectations and the prior figure. In terms of interest rates, as anticipated, the Federal Reserve announced at the conclusion of its Federal Open Market Committee (FOMC) meeting that the target range for the federal funds rate would be lowered from 4.5%-4.75% to 4.25%-4.5%, marking the second consecutive meeting with a 25-BP rate cut. Federal Reserve Chair Jerome Powell further hinted at a potential slowdown in the pace of future rate cuts, noting that as the policy rate approaches a neutral level, the Fed needs to proceed more cautiously. The meeting statement and economic projections indicate only two rate cuts in 2025, compared to four projected in the September economic assessment. On employment, data from the U.S. Department of Labor showed that initial jobless claims for the week ending December 14 were 220,000, below expectations and the previous reading. Continuing claims decreased by 5,000 to 1.87 million, although this figure remains close to the three-year high of 1.9 million.
The A-share market saw the CSI 300 Index edge down by 0.1%, fluctuating between the 21-D and 50-D MA in a consolidating pattern. Trading volume shrank compared to the previous week and remained below the 50-D average, indicating that the market remains in a state of resistance to upward momentum. Support is located at the November 25 low of 3,812.32 points, while resistance stands at the December 10 high of 4,098.38 points. In terms of financial data, the People’s Bank of China reported that as of the end of November, broad money supply (M2) stood at RMB 311.96 trillion, up 7.1% y/y. Narrow money supply (M1) totaled RMB 65.09 trillion, down 3.7% y/y, while currency in circulation (M0) reached RMB 12.42 trillion, marking a 12.7% y/y increase. The negative scissors gap between M1 and M2 growth rates narrowed, with M1 growth trailing M2 growth by 10.8 percentage points in November, an improvement of 2.8 percentage points compared to October. On the economic front, data from the National Bureau of Statistics showed that in November, the value added of industrial enterprises above a designated size grew by 5.4% y/y, accelerating by 0.1 percentage points compared to the previous month, with a m/m increase of 0.46%. The Index of Services Production rose 6.1% y/y, while total retail sales of consumer goods reached RMB 43.763 trillion, up 3.0% y/y and 0.16% m/m. Total imports and exports of goods amounted to RMB 37.506 trillion, growing by 1.2% y/y. The Consumer Price Index (CPI) increased by 0.2% y/y but fell by 0.6% m/m. From January to November, nationwide fixed-asset investment (excluding rural households) totaled RMB 46.5839 trillion, an increase of 3.3% y/y. Excluding real estate development investment, fixed-asset investment grew by 7.4%. The average urban surveyed unemployment rate was 5.1%, down 0.1 percentage points from the same period last year. Overall, while economic challenges remain evident in November’s data, signs of improvement have emerged. Additionally, this week, the State-owned Assets Supervision and Administration Commission (SASAC) issued the “Opinions on Improving and Strengthening Market Value Management of Listed Companies Controlled by Central Enterprises.” The directive aims to encourage central enterprises to prioritize market value performance of their controlled listed companies, conduct market value management in a standardized and orderly manner, and enhance the investment value of listed companies. The “Opinions” emphasize that central enterprises should incorporate market value management into their long-term strategic planning and focus on six key areas: mergers and acquisitions, market-oriented reforms, information disclosure, investor relations management, investor returns, and stock buybacks and repurchases, to improve and strengthen related practices.
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 rose by 1.9% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 573.2% vs. a 3.4% down for the Hang Seng.
The best performer in our Hong Kong 33 was STELLA HOLDINGS(01836), it’s an investment holding company mainly engaged in the manufacturing and sales of footwear products. The stock gained 9.8% this week. EPS rating stands at 97, RS rating of 80, and A/D rating of B.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the Hang Seng Index showed a continuous downward adjustment after a strong opening on Monday, oscillating near the 21-DMA, and has not been able to break above the resistance of the 21-D and 50-D MAs. In terms of trading volume, this week saw a significant decline compared to last week, remaining below the 50-D average volume level. Regarding the Southbound inflow via the HK-China Stock Connect, there was a net inflow of 25.888 billion HKD this week, continuing the previous trend of net inflows, with the scale of inflows slightly higher than last week. Overall, the Hong Kong stock market still faces many uncertainties. On one hand, as the year-end approaches, large institutions and fund companies may make a series of strategic adjustments or actions to safeguard their annual performance, which is likely to have an impact on the market. On the other hand, with the inauguration of the new U.S. president on January 20th, there are uncertainties regarding the direction of policies and potential market impacts, which adds complexity to the market. Therefore, investors remain cautious about the overall trend of the Hong Kong stock market. At this stage, it is recommended that investors stay calm and rational, avoiding blindly following market trends amidst volatility, and instead focus on stocks that have exceeded earnings expectations and show strong technical momentum, adopting a steady investment strategy to navigate market changes.
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published on December 20, 2024