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09:00 AM, Tuesday, Aug 16, 2022
Hang Seng Index Fell 134 Points on Monday

HSI once rose 85 points to as high as 20,260 points on Monday. It ended the day at 20,040 points, down 134 points or 0.7%. HSTECH was at 4,308 points, down 41 points or 1.0%. HSCEI fell 43 points, or 0.6%, to 6,814 points. The market turnover was HK$73.8bn. The Shanghai Export Containerized Freight Index fell 4.7% last week for nine consecutive weeks. Shipping stocks fell sharply. Shares of OOCL (0316) and COSCO SHIPPING Holdings (1919) fell 14.7% and 4.1% today. The domestic chip board fell, with SMIC (0981) and Hua Hong Semiconductor (1347) down 6.1% and 3.6% respectively.

US Stock Reversed early loss on Monday

Manufacturing activity in New York area, unexpectedly fell to -31.3 in August, which is much worse than expectation. Besides, latest China economic showed that retail sales, fixed asset investment both slow down in July. Concerns about global growth risk, US stock market opened lower on Monday, the Dow once fell 180 points. However, thanks to the rise of tech stock, US stock market reversed early loss and closed higher in late session. The three major US stock index rose 0.4-0.6% respectively on Monday, of which, the Nasdaq index rose the most. Owing to recession concern, US treasury yield fell on Monday, with 2 year and 10 year yield both fell 5 basis points to 3.21% and 2.80% respectively. Oil price also fell 2.9% to US$89.4 per barrel. On the other hand, US dollar index rebounded, which rose 0.7% to 106.4.

China Economic Data weak in July; Short Term Pressure on Mainland banks

Latest economic data showed that China that retail sales, fixed asset investment both slow down in July, which is also below expectation. Although People Bank of China lowered interest rate for repo and Medium Term Lending Facility, but also lower the scale of MLF, reflecting the slow loan demand growth, as well as Central government avoid too excessive market liquidity. Hong Kong stock market short term lack of momentum, Hang Seng Index resistance still at 20 Day SMA(20,281). Hong Kong Stock Connect net inflow shrank to HK$200mn on Monday, of which, Hang Seng China Enterprise Index ETF (2828) recorded most net buy, while Meituan (03690) and China Mobile (0941) both recorded net outflow. Besides, Tencent (0700) also turned to net outflow, investors focus will eye on its interim result announcement on Wednesday, resistance at 20 Day SMA(HK$313). Besides, People Bank of China lower MLF interest rate, it is expected that LPR will also have downward pressure. Mainland Bank net interest margin might have downward pressure. Short term selling pressure might exist on Mainland banks, suggest to accumulate during weakness.

Recommended Stocks
Stock Recommendation
CNOOC
(00883)
Interim net profit in 2022 is expected to be RMB 70.5 billion to RMB 72.5 billion, up 112%-118% year-on-year. Oil prices have recently retreated due to fears of a recession, but the alliance between OPEC and Russia, coupled with very limited spare capacity, should provide support to oil prices at low level. Although oil prices might continue fluctuate in the short term, CNOOC's prospective P/E ratio is less than 4x, coupled with a high dividend yield, suggest to accumulate during weakness. Target price: HK$11.00; Stop loss price: HK$9.00.


Source: KGI Research

Chua Tit Hong is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/ADO008/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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