Hang Seng raised 1.0%
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This week, the Hang Seng Index rose by 1.0%, and the Hang Seng Tech Index gained 2.5%. The Hang Seng Index showed a volatile and choppy performance, with a clear tug-of-war between the bulls and bears, overall presenting a consolidation pattern. On the news front, there were no major changes in geopolitical risks, including the Russia-Ukraine conflict and issues on the Korean Peninsula. Additionally, the Israel-Palestine sides reached a ceasefire agreement this week, which eased geopolitical tensions. The continued development of certain economic sectors generated some positive momentum in the market. EU member states are currently discussing reducing the scope of China’s investment screening rules, with the new list no longer including strategic technologies such as artificial intelligence and semiconductors, which is favorable for Sino-European economic cooperation. The news that the Biden administration is considering further restrictions on semiconductor equipment and AI memory chip exports to China has attracted attention, but the positive aspect is that it will not pursue the more stringent measures previously proposed. The improvement in the financial regulatory system, the push for domestic consumption circulation, the recovery of the consumer electronics market, the inclusion of innovative pharmaceutical companies in the medical insurance directory, and mergers and acquisitions activities have all supported the market. On Saturday, China’s official manufacturing PMI data for January will be released, and there is uncertainty about whether the upward trend can continue. Additionally, the key meeting scheduled for next month has generated heightened market anticipation, with a focus on the potential policies to be unveiled, and investors are awaiting the rollout of new policies. Meanwhile, uncertainty in trade disputes and various rumors, whose truth is hard to discern, have intensified market volatility.
In the U.S. stock market, trading was closed on Thursday for Thanksgiving. As of Wednesday, the S&P 500 rose 0.5%, and the Dow Jones Industrial Average gained 1.0%, both hitting record highs, while the Nasdaq Composite advanced 0.3%, remaining about 1.6% below its all-time high. According to S&P Global, the preliminary reading for the U.S. Markit Manufacturing PMI in November was 48.8, below expectations but above the prior reading. While it marked the highest level since July 2024, it remained below the 50-point threshold, indicating contraction for the fifth consecutive month. The preliminary reading for the November Markit Services PMI came in at 57, surpassing both expectations and the previous reading, reaching its highest level since March 2022. The preliminary November Markit Composite PMI registered 55.3, also exceeding expectations and the previous reading, marking the highest level since April 2022. Additionally, data from the U.S. Bureau of Economic Analysis showed that the seasonally adjusted annualized q/q growth rate for Q3 GDP was revised to 2.8%, consistent with expectations and the initial estimate. The report highlighted that consumer spending in Q3 grew by 3.5%. Although slightly below expectations and the initial estimate, this represents the largest increase so far this year. Meanwhile, a report from the U.S. Department of Commerce revealed that the Federal Reserve’s closely watched inflation gauge rebounded in October to 2.8%, in line with expectations. This rebound supports the Fed’s cautious stance on rate cuts. The latest Federal Reserve meeting minutes indicated that more policymakers are leaning toward a gradual approach to rate cuts, with their stance becoming clearer and gaining more support compared to previous minutes. According to the CME FedWatch Tool, as of November 28, the probability of a 25-BP rate cut n December stood at 66.5%, while the probability of no change was 33.5%. The U.S. Department of Labor reported that initial jobless claims for the week ending November 23 were 213,000, below expectations and unchanged from the prior week. However, continuing jobless claims for the week ending November 16 rose by 9,000 to a seasonally adjusted 1.907 million, slightly below expectations but reaching the highest level since November 2021, indicating that many unemployed workers are struggling to find new jobs.
In terms of A-shares, the CSI 300 Index rise by 1.3% this week, finding support at the 50-DMA but failing to break above the 21-DMA. Trading volume decreased compared to last week and remained below the 50-day average level. The market condition can be described as a stalled uptrend. Key support levels are at the 50-DMA, with secondary support at the October 18 low of 3,765 points, while resistance is at the 21-DMA. On the macroeconomic front, data from the National Bureau of Statistics showed that profits of large-scale industrial enterprises fell by 10.0% y/y in October, though the decline narrowed sharply by 17.1 percentage points compared to September. Profit growth turned positive for equipment manufacturing industries, while raw materials and consumer goods manufacturing also saw improvements. Among 41 major industrial sectors, 27 recorded better profitability. However, from January to October, total profits of large-scale industrial enterprises stood at RMB 58,680.4 billion, a 4.3% y/y decline, which is a larger drop than the 3.5% decline recorded from January to September. Meanwhile, data from the Ministry of Finance revealed that state-owned enterprises (SOEs) achieved total operating revenue of RMB 67,660.6 billion from January to October, up 0.9% y/y, while total profits were RMB 35,371.9 billion, down 1.1% y/y. As of the end of October, the asset-liability ratio of SOEs stood at 64.9%, a slight increase of 0.1 percentage points. This Saturday, China will release the official November manufacturing PMI, with the market closely watching whether the recent recovery trend will continue. Additionally, there are reports suggesting that the Central Economic Work Conference may be brought forward to next Monday (December 2), which could provide more policy signals. In the financial markets, the Shenzhen Financial Bureau issued a consultation on policies for mergers and acquisitions, proposing 14 measures with a target of completing over 100 deals worth more than RMB 30 billion by the end of 2027. On the same day, the Beijing Securities Regulatory Bureau and the Financial Bureau jointly held a seminar aimed at establishing an M&A platform to revitalize the capital market in the capital region. Furthermore, the MSCI China Index rebalancing took effect after the close on November 25, with four stocks added and 20 stocks removed. Internationally, geopolitical risks related to the Russia-Ukraine conflict and the Korean Peninsula remained stable without significant developments. Additionally, on November 27, Israel and Palestine formally reached a ceasefire agreement. However, shortly after the agreement came into effect, the Israeli Defense Forces conducted airstrikes on Hezbollah facilities in southern Lebanon on November 28, citing potential threats from the site and warning of further actions against ceasefire violations. Hezbollah has not yet responded. This marks the first military action since the ceasefire agreement and has raised concerns about the sustainability of the truce.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.3% for this week. Our Hong Kong Model Portfolio rose by 0.6% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 547.9% vs. a 4.8% down for the Hang Seng.
The best performer in our Hong Kong 33 was SUNNY OPTICAL(02382), it’s a leading optical products manufacturer in China. The stock gained 8.3% this week. EPS rating stands at 75, RS rating of 81, 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 exhibited a typical consolidation pattern this week, with limited overall gains but frequent fluctuations. Trading volume was slightly higher than last week’s but remained below the 50-day average, reflecting a cautious market sentiment with participants largely in a wait-and-see mode. Market hotspots were scattered, lacking a sustained main theme. The index found some support near the gap left on September 25, which remains a key support level, while resistance levels are located at the 21-day and 50-day MA. Additionally, the gap formed during the decline on November 11 presents another significant obstacle overhead. Southbound funds continued their net inflow trend this week, totaling HKD 24.427 billion, slightly below last week’s figure. Overall, the Hang Seng Index currently faces multiple layers of resistance amid heightened market uncertainties. Investors should closely monitor the PMI data to be released this weekend and any potential policies emerging from December’s key meetings. At this stage, it is recommended to remain calm and approach market fluctuations rationally, avoiding impulsive actions. Focus should be placed on stocks with stronger-than-expected earnings and robust technical performance.
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published on November 29, 2024