Hang Seng fell 6.5%
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This Friday, the Hong Kong stock market was closed for the Double Ninth Festival. Looking back on the week, the Hang Seng Index dropped 6.5%, while the Hang Seng Tech Index plunged 9.4%. The sharp adjustments on Tuesday and Wednesday were the primary contributors to the overall decline in Hong Kong stocks this week. From the market’s perspective, on the one hand, there were high expectations for favorable policies, but the actual measures introduced fell short of expectations, leading to disappointment and driving the market lower. On the other hand, financial regulators issued window guidance to commercial banks, instructing them to strictly control leverage, which dampened speculative sentiment in the market. Additionally, ongoing international trade tensions, the escalating situation in the Middle East, and the release of multiple share reduction announcements also added extra downward pressure to the market.
On the U.S. stock market, as of this Thursday, the S&P 500 Index rose 0.5%, reaching a new all-time high; the Nasdaq Index increased by 0.8%, and the Dow Jones Index edged up 0.2%. On the macroeconomic front, data from the U.S. Bureau of Labor Statistics showed that the CPI in September rose by 2.4% y/y. Although the growth rate has slowed, it still exceeded expectations and marked the lowest level since February 2021. m/m, it increased by 0.2%, remaining flat from the previous figure and above expectations. Regarding core CPI, it rose by 3.3% y/y in September, slightly higher than both the forecast and previous figure. On a monthly basis, it increased by 0.3%, slightly above expectations and unchanged from the previous figure, marking the highest level since March. After the data release, traders became more confident in the likelihood of a 25-BP rate cut by the Federal Reserve next month. The CME “FedWatch” tool indicated that the probability of a 25-BP rate cut in November was as high as 86.9%. In the labor market, U.S. nonfarm payrolls surged by 254,000 in September, far exceeding market expectations and the previous figure, marking the largest increase since March this year. The unemployment rate fell to 4.1%, also better than expected and the previous figure. Average hourly earnings in September increased by 4% y/y and 0.4% m/m, both exceeding expectations. Additionally, data from the U.S. Department of Labor showed that initial jobless claims for the week ending October 5 surged to 258,000, the highest level since early August 2023, significantly surpassing market expectations and the previous figure. Continuing jobless claims for the week ending September 28 increased by 42,000, reaching approximately 1.86 million.
The CSI 300 fell 3.3% this week on volume above the average and higher than the week before the National Day Holiday. The market condition was Confirmed Uptrend. Turnover in Shanghai and Shenzhen Exchanges has been hitting record high this week, with turnover exceeding RMB three trillion for the first time on October 8, reaching RMB3.4 trillion. The index fell back after increasing higher this week as the briefing from the National Development and Reform Commission on Tuesday disappointed the market by not providing further details to stimulate the economy. Resistance is at the Oct. 8 high of 4,450 and support is at the May 20 high of 3,703. China’s official manufacturing PMI came in at 49.8 in September, higher than the previous value, but still below the threshold line. Caixin Manufacturing PMI was 49.3, back below the threshold line, down 1.1 percentage points from the previous value of 50.4, a new low since August 2023.On October 10, the Securities, Funds, and Insurance Companies Swap Facility (SFISF) was officially created to support eligible securities, funds, and insurance companies to swap high-grade liquid assets such as treasury bills and central bank bills from the People’s Bank of China, using assets such as bonds, stock ETFs, and CSI300 constituent stocks as collateral. The scale of the first phase of operation is RMB500 billion. U.S. nonfarm payrolls surged by 254,000 in September, the largest increase since March 2024, not only higher than the revised 159,000 in August, and far exceeded expectations of 144,000 people. In addition, the unemployment rate fell to 4.1%, a new low since June 2024. U.S. CPI rose 2.4% year-on-year in September, lower than the previous value. Core CPI rose 0.3% m/m and 3.3% y/y, beating expectations. Strong employment data and the CPI exceeded expectations to show that U.S. inflation is still sticky or affect the subsequent rate cuts to slow down. The conflict in the Middle East continues to escalate as Iran launches some 200 missiles into Israel. Follow up to see the press conference to be held by the State Council Information Office on Saturday, when Minister of Finance Foan Lan will be invited to introduce the progress of “increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development”. Investors are advised to continue to focus on technically and fundamentally sound stocks and be wary of profit-taking after the recent rally.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 4.7% for this week. Our Hong Kong Model Portfolio fell by 2.9% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 607.0% vs. a 4.2% up for the Hang Seng.
The best performer in our Hong Kong 33 was TIME INTERCON(01729), it’s is an investment holding company mainly engaged in the production and sales of customized wire components. The stock gained 16.4% this week. EPS rating stands at 74, RS rating of 98, and A/D rating of A-.
Our Hong Kong Market Status are on an Confirmed Uptrend.
From a technical perspective, after hitting a nearly two-year high on Monday, the Hang Seng Index saw a sharp pullback on Tuesday, breaking below its previous uptrend with increased trading volume, indicating the potential for further short-term correction. As for the Southbound inflow via the HK-China Stock Connect, there was a net inflow of HKD 10.939 billion this week, slightly lower than last week’s level. In addition, the State Council Information Office is scheduled to hold a press conference at 10 a.m. on Saturday, October 12, 2024, where Finance Minister will discuss “intensifying countercyclical fiscal policy efforts and promoting high-quality economic development” and take questions from reporters. On Sunday, China’s September CPI and PPI data will also be released, which may have some impact on next week’s market, so it warrants close attention. In summary, after a period of strong gains, the market is experiencing a correction. Future market performance will depend on policy catalysts and macroeconomic data, with some uncertainty ahead. In light of these conditions, investors should remain calm and rational, avoid blindly following the trend, and focus on stocks with strong technicals and better-than-expected earnings.
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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 October 11, 2024