KGI Asia Commentary

2024.09.03 10:00

Hang Seng Index fell 297 points on Monday

The Hang Seng Index closed at 17,691 points for the day, fell 297 points or 1.7%. The Hang Seng Technology Index reported at 3,486 points, down 74 points or 2.1%. The HSCEI Index fell 119 points, or 1.9%, to 6,211 points. The market turnover was HK$112.8billion.

 

European stocks end flat on first trading day of September

European stocks ended flat on the first trading day of September as investors considered the market outlook. The pan-European index Stoxx 600 closed down 0.04%, with stock markets and industries in various regions performing differently. Retail stocks closed down 0.77%, while telecommunications stocks rose 0.78%. On the data front, European countries released a series of final manufacturing PMI values on Monday. This includes euro zone manufacturing activity, which was at 45.8 in August, dragged down by Germany and France. Elsewhere, the UK manufacturing PMI rose to a 26-month high of 52.5 in August, which is in expansion territory.

U.S. crude oil futures opened slightly higher after three weeks of losses. Oil prices have been under pressure recently on concerns that demand from major oil importer China may slow, and that major producers may increase supply. Oil exports from Libya's main ports were suspended on Monday and output fell across the country amid an ongoing dispute between rival political groups over the management of the central bank and oil revenues.

 

Focus shifts to labor market

Investors are turning their attention to a crucial week for U.S. markets, with expectations high for incoming labor market data. Last month's jobs report came in worse than expected, triggering a sell-off in risk assets. The rise in job losses was largely attributed to adverse weather conditions and temporary layoffs. Investors are eager to determine whether July's data was indeed affected by these short-lived factors. These data may determine the extent of the rate cut at the next meeting, whether it is 25 basis points or 50 basis points.

Hong Kong Stock Connect had a net outflow of HK11.9bn on Monday of which Tracker Fund (2800) had the largest net inflow, reaching HK$6.76bn; followed by CSOP HS TECH (3033). Tencent (700) recorded the largest net outflow at HK$0.19bn, followed by Xiaomi (1810).

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China Telecom reported operating revenue of RMB268bn in 1H24, up 2.8% yoy. Service revenue reached RMB246.2bn, up 4.3% yoy, outpacing industry growth. EBITDA was RMB76.8bn, up 4.7% yoy. Net profit was RMB21.8bn, up 8.2% yoy. Industrial digitalization revenue reached RMB73.7bn, up 7.2% yoy, accounting for 30% of service revenue, up 0.8 ppts yoy. Revenue from China Telecom Cloud reached RMB55.2bn, representing a yoy growth of 20.4%. The group's interim net profit growth of 8.2% outpaced the revenue growth. The Chairman stated that the company will continue to push forward its Cloudification and Digital Transformation strategy, aiming to achieve solid revenue and EBITDA growth for the full year, while maintaining a net profit growth rate higher than the revenue growth rate. A dividend of RMB0.16 per share was declared, up 16.7% yoy. The company will gradually increase the cash dividend payout ratio to over 75% of the annual profit attributable to shareholders within three years from 2024. Target price: $5.2; Stop- Loss price: $4.3.

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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