KGI Asia Commentary

2024.03.04 09:00

Hang Seng Index rose 78 points on Friday

The Hang Seng Index opened 120 points lower on Friday, opening at 16,391 points, and closed at 16,589 points, up 78 points, or 0.47%; the H-Share Index rose 51 points, or 0.9%, to 5,729 points; the Hang Seng Technology Index rose 57 points, or 1.7%. It was quoted at 3,488 points. The total daily turnover of the market was HK$121.8 billion.

The U.S. ISM below the dividing line between boom and bust

U.S. stocks closed higher on Friday, with the S&P 500 and Nasdaq hitting new record highs. The S&P 500 closed above 5,100 for the first time. The Dow rose 90.99 points, or 0.23%, to 39087.38 points; the Nasdaq rose 183.02 points, or 1.14%, to 16274.94 points; the S&P 500 rose 40.81 points, or 0.80%, to 5137.08 points. Last week, the Dow Jones Industrial Average fell 0.11%, the S&P 500 Index rose 0.95%, and the Nasdaq Composite Index rose 1.74%.

The market continues to pay attention to a series of economic data that will affect the Federal Reserve's interest rate cut. Data released by the Institute of Supply Management (ISM) on Friday showed that the ISM manufacturing index in the United States in February was higher than the 15-month high hit in January. It fell 1.3 points to 47.8 points. The index is below 50, the dividing line between boom and bust, and market expectations. Demand weakened in February after the new orders index hit its largest monthly increase in more than three years. Both production indicators and manufacturing employment indicators fell to their lowest levels since July, reflecting the lack of development momentum in the target manufacturing industry.

In addition, U.S. initial jobless claims data released on Thursday showed a softening in the job market. It has also made the market strengthen the chance of an interest rate cut in June. Currently, according to Fedwatch, the chance of an interest rate cut in June is 70%.

China's manufacturing PMI in February was better than expected, but still in contraction range

Last Friday, the National Bureau of Statistics released February manufacturing PMI data, which recorded 49.1 in February, slightly better than market expectations of 49, but in fact it is still in the contraction range. In detail, production has entered the contraction zone again after staying at the expanding range in the past eight months, and new orders remained at the contraction range.

The net inflow of Hong Kong Stock Connect on Friday was HK$ 3.33 billion, of which Meituan (3690) had the largest inflow, reaching HK$1.01 billion; followed by China Mobile (941). Tencent Holdings (700) recorded the largest net outflow of HK$250 million, followed by HSBC (5).

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Weichai Power
02338

The group issued a profit alert earlier and expects net profit attributable to shareholders to range from RMB 8.584 billion to RMB 9.32 billion in 2023, a year-on-year increase of 75%-90%. Such increase in the net profit attributable to the shareholders of the parent was mainly due to the Group seizing opportunities of structural growth in the heavy duty truck industry, actively deepening structural adjustment, and vigorously breaking through strategic markets, resulting in the sales of relevant products of the Group showing a high growth trend and driving the performance to achieve a substantial year-on-year growth. The relevant person in charge of Weichai Power's marketing department said earlier that this trend is expected to continue in 2024, with sales growing by at least 10%. LNG prices have been falling since this year, and LNG prices are more likely to fall after winter, which can reduce the fuel costs paid by heavy truck drivers and improve the cost-effectiveness of LNG heavy trucks. Given that the LNG heavy-duty truck engine market has fewer competitors and higher barriers to entry, engine manufacturers are in a favorable position in the industry chain. Weichai has a 30% market share in traditional heavy truck engines and more than 60% in the LNG engine market, showing certain competitiveness. Target price: $19; Stop- Loss price: $13.2.

Wen Kit Kenny 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/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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