Hang Seng raised 0.5%
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This week, the Hang Seng Index rose by 0.5%, while the Hang Seng Tech Index gained a slight 0.3%. The Hang Seng Index exhibited significant volatility, showing a pattern of rising and then retreating throughout the week. On Monday, the Central Political Bureau’s meeting stated that next year, efforts will be made to stabilize the real estate and stock markets, implement more proactive fiscal policies and moderately loose monetary policies, boost consumption, improve investment efficiency, and mentioned for the first time the concept of “strengthening extraordinary counter-cyclical adjustments,” which sparked a strong market reaction. The Hong Kong stock market surged over 3% upon hearing this news and closed the day up 2.8%. However, a similar trend to the one after the National Day holiday reappeared: after a sharp gap-up on Tuesday, the market declined steadily, possibly linked to the historically observed pattern of high openings followed by lower closes, especially when the market opens significantly higher, typically leading to profit-taking pressure. Later, on Thursday, the Central Economic Work Conference concluded, reiterating the need for more proactive macro policies, but with a lack of specific policy details, leading to a decline in the stock market on Friday. In addition to the major meetings, China also released its November CPI and PPI data this week, which showed that deflation risks still persist.
In the U.S. markets, as of this Thursday, the S&P 500 and Dow Jones indices fell by 0.6% and 1.6%, respectively, while the Nasdaq rose slightly by 0.2%, setting a new all-time high. On the macroeconomic front, data from the U.S. Bureau of Labor Statistics showed that November CPI increased by 2.7% y/y, meeting expectations and higher than the previous reading. m/m, CPI rose by 0.3%, in line with expectations and marking the highest level since April this year. Core CPI increased by 3.3% y/y, unchanged from October and in line with forecasts, while the m/m figure also grew by 0.3%, matching October’s rate for the fourth consecutive month. November PPI rose by 3% y/y, the largest increase since February 2023, exceeding both expectations and the previous figure. Core PPI increased by 3.4% y/y, also above forecasts and the prior reading. m/m, PPI rose by 0.4%, the highest increase since June this year, surpassing both expectations and the previous figure. Core PPI grew by 0.2% m/m, meeting expectations and slightly above the prior reading. Employment data from the U.S. Bureau of Labor Statistics showed that non-farm payrolls increased by 227,000 in November, exceeding both expectations and the previous figure, while the unemployment rate rose to 4.2%, higher than forecasts and the prior reading. Average hourly earnings grew by 4% y/y and 0.4% m/m, both surpassing expectations. Meanwhile, data from the U.S. Department of Labor indicated that initial jobless claims for the week ending December 7 reached 242,000, the highest level in nearly two months and above both expectations and the previous reading. Following the release of these data, the CME FedWatch Tool showed that as of December 13, the probability of a 25-basis-point rate cut by the Federal Reserve in December had risen to 96.4%, up from 86.0% a week earlier, while the probability of holding rates steady stood at 3.6%. The final decision will be announced next week.
In the A-share market, the CSI 300 Index rose early in the week but then pulled back, declining by 1.0% and falling below its 21-D and 50-D MA. Trading volume increased compared to last week but remained below the 50-D average volume. The market condition is characterized as an upward trend encountering resistance. Support is at the October 18 low of 3,765.16 points, while resistance is at the November 8 high of 4,200.91 points. This week, the Central Committee of the Communist Party of China and the Central Economic Work Conference were held in succession. These meetings explicitly proposed implementing more proactive fiscal policies and moderately accommodative monetary policies, marking the first mention of “moderately accommodative” monetary policies since 2009–2010. The meetings also called for raising the fiscal deficit ratio and issuing ultra-long-term special treasury bonds. Monetary policy adjustments, including potential reserve requirement ratio (RRR) cuts and interest rate reductions, are to be carried out at appropriate times to align financing scale and money supply growth with economic growth and the anticipated overall price level. Additionally, the meetings emphasized boosting consumption, improving investment efficiency, and fully expanding domestic demand. Technological innovation will drive industrial upgrading, with initiatives like the “AI+” action plan to foster future industries, regulate internal competition, and establish a modern industrial system. In the real estate sector, measures were proposed to promote urban village redevelopment and the renovation of dilapidated housing to stabilize and restore the real estate market. The meetings also stressed the importance of stabilizing the stock and property markets, strengthening risk prevention, and mitigating key area risks and external shocks. Furthermore, the Ministry of Human Resources and Social Security, the Ministry of Finance, and three other departments recently issued a notice that, starting December 15, 2024, all workers participating in basic pension insurance nationwide will be eligible to join the individual pension scheme. Tax incentives for individual pensions will be expanded nationwide, with additional product options such as government bonds, specific pension savings, and index funds introduced to the existing product range. On the macroeconomic front, data released by the National Bureau of Statistics showed that China’s CPI in November rose by 0.2% y/y, a decrease of 0.1 percentage points from the previous month, while m/m CPI fell by 0.6%, marking the lowest level in five months. Core CPI increased by 0.3% y/y, up by 0.1 percentage points compared to the prior month. The PPI in November shifted from a decline to a m/m increase of 0.1%, while y/y, it decreased by 2.5%, with the contraction narrowing. In terms of trade, data from the General Administration of Customs showed that China’s exports grew by 6.7% y/y in November, below the prior reading, while imports dropped by 3.9% y/y, the largest decline since September 2023, also below the previous reading. The trade surplus widened to $97.44 billion. Among key commodities, coal imports hit a record high, copper imports reached the highest level in over a year, crude oil imports rebounded, and aluminum exports surged.
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 2.3% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 575.9% vs. a 2.1% down for the Hang Seng.
The best performer in our Hong Kong 33 was CHINA RUYI(00136), it’s a technology-enabled streaming media company in China. The stock gained 10.0% this week. EPS rating stands at 63, RS rating of 78, and A/D rating of A-.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, this week the Hang Seng Index attempted to break above the 50-DMA. After a brief pause, it failed to sustain above it, with the weekly close positioned about 20% below the body of the candlestick, forming a longer upper shadow. Although trading volume increased compared to the previous weeks, it still remains slightly below the 50-D average volume level. In terms of the Southbound inflow via the HK-China Stock Connect, the net inflow this week was HKD 21.115 billion, continuing the trend of net inflows and showing an increase from last week. Overall, while the major meetings this week did inject some vitality into the market, the lack of policy details had a significant impact. Next week, China will release its November retail sales and other economic data, while the U.S. will announce its interest rate decision. These events are expected to have a significant impact on market trends. At this stage, investors are advised to remain calm and rational, avoiding blindly following market movements. Instead, focus on stocks with earnings exceeding expectations and strong technical trends, adopting a prudent investment strategy to navigate market fluctuations.
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published on December 13, 2024