Hang Seng raised 8.8%
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This week, the Hong Kong stock market showed strong upward momentum, with the Hang Seng Index closing higher for five consecutive trading days, recording a weekly gain of 8.8%. The last time we saw a rally like this was in the week of November 4, 2022, when Hong Kong stocks also surged strongly, continuing to climb and ultimately achieving an accumulated gain of over 40%. We hope that Hong Kong stocks can maintain this momentum and replicate that remarkable performance. At the same time, the Hang Seng Tech Index also had an impressive week, soaring by 13.4%. On the policy front, the China Securities Regulatory Commission (CSRC) announced five significant measures to support Hong Kong’s financial markets, including expanding the eligible product range for ETFs under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, and supporting the inclusion of RMB-denominated stock trading counters in Stock Connect. These policies will further promote cross-border market connectivity and enhance Hong Kong’s financial market attractiveness. Additionally, other positive news continues to emerge. China’s PMI and trade data have generally performed better than expected since the beginning of the year; UBS has upgraded its rating for Chinese A-shares and Hong Kong stocks to “overweight”; and the Hong Kong Monetary Authority injected liquidity into the banking system through its discount window, among other encouraging developments.
In the U.S. stock market, as of Thursday this week, the S&P 500 Index rose by 1.6%, the Nasdaq Index by a slightly higher 2.2%, while the Dow Jones Index inched up by 0.3%. However, this week’s economic data releases in the U.S. have not offered much cheer to the markets. According to data released by the U.S. Department of Commerce, the preliminary PMI for April was disappointing. The manufacturing PMI fell below the expansion-contraction threshold, registering at 49.9, which was not only lower than the market expectation of 52 but also below March’s 51.9, marking a new low since December 2023. The preliminary services PMI stood at 50.9, also below the expected 52 and March’s 51.7, hitting a five-month low. The composite PMI was also below expectations, dropping by 1.2 points to 50.9 in a single month, the largest drop since August last year. In terms of economic growth, the first-quarter 2024 U.S. real GDP’s annualized q/q growth was 1.6%, lower than the market expectation of 2.5%, and significantly slower than the 3.4% growth rate in the fourth quarter of last year. However, PCE grew by an annualized q/q rate of 2.5%, with the core PCE price index growing at an annualized rate of 3.7%, both exceeding market expectations, indicating that core inflation pressure remains high. Following these data releases, the market generally expects the Federal Reserve to keep interest rates unchanged in May and June, with the first rate cut potentially delayed until December. On the other hand, the job market showed some improvement. Last week, initial jobless claims in the U.S. were 207,000, lower than the previous value and market expectations, while continuing claims stood at 1.781 million, also below the previous value.
The CSI 300 rose 1.2% this week on volume above the average but lower than the last week. The market condition was Confirmed Uptrend. The index rebounded this week after falling to the 50DMA and remains blocked by the 200DMA. The key moving averages continue to converge. Both the one-year and five-year LPRs remained unchanged. U.S. GDP grew 1.6% year-on-year in the first quarter, lower than expectations and the previous value, indicating that the U.S. economy slowed in the first quarter. The US core PCE price index rose 3.7% year-on-year in the first quarter, higher than expectations and previous values, with inflationary pressures remaining high. Expectations for interest rate cuts have cooled significantly. The market is rotating rapidly, and investors are advised to focus on a selection of stocks that are strong both technically and fundamentally. Northbound inflow via the HK-China Stock Connect was RMB25.8B.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 3.2% 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 542.1% vs. a 13.5% down for the Hang Seng.
The best performer in our Hong Kong 33 was YUE YUEN IND(00551), it’s the world’s largest major manufacturer of international branded sports shoes and casual wear shoes. The stock gained 25.4% this week. EPS rating stands at 99, RS rating of 94, and A/D rating of A+.
Our Hong Kong Market Status are on an Uptrend Under Pressure.
From a technical perspective, the Hong Kong stock market showed strong momentum this week, not only breaking through the 50D and 200D moving averages consecutively but also experiencing significant volume expansion compared to the 50D average volume, especially on Friday, where volume expansion was particularly pronounced. Regarding the southbound inflow via the HK-China Stock Connect, there was a net inflow of 10.289 billion HKD this week, although this figure was less than one-third of the previous week’s, it still indicates a positive attitude towards the Hong Kong stock market. Additionally, foreign institutional investors’ attention to and risk appetite for Hong Kong stocks have generally improved. Coupled with the improvement in the performance of most industries in the Hong Kong stock market and the combined effect of several favorable factors, the market witnessed a significant increase this week. However, despite the current strong market momentum, we still need to maintain a cautious attitude. As the classic investment adage goes, ‘Be fearful when others are greedy.’ We should remain calm, conduct rational analysis, and focus only on stocks that exceed expectations in terms of performance and demonstrate strong technical performance.
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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 April 26, 2024