KGI Asia Commentary

2023.05.30 09:00

HSI fell 196 points on Monday

The Hang Seng Index opened 80 points higher at 18,827, but it turned down 196 points or 1% to 18,551 at market closed; the HSCEI fell 83 points or 1.3% to 6,251; the HSTECH fell 44 points or 1.2% reported at 3,647. The market turnover was HK$110.5bn. Meituan (3690) fell 8.1% to HK$115.8 after the announcement of its quarterly results. Technology stocks diverged. NetEase (9999) rose 7.2% to HK$139.9.

Debt Ceiling bill waiting to get it through congress

Negotiations on the US debt ceiling are being positive. The US House of Rules Committee announced on its website that it will hold a meeting on May 30 to discuss the debt ceiling bill. Part of the preliminary agreement has been leaked. For the most crucial one, federal spending cuts, the spending restrictions is proposed be implemented in the next 6 years, and the US government will save US$2tn.

The U.S. market was closed for Memorial Day yesterday.

Hong Kong's exports fell further, difficult to make a big rebound in the short term

The momentum of Hong Kong's economic recovery was under challenge. The data on export in April showed a weak performance. The value of exports recorded HK$338.3bn, a decline that widened from 1.5% in March to 13%, worse than consensus. The value of Hong Kong’s overall exports to Asia fell by 13.3% YoY; and due to the destocking of the European and American economies, export value to U.S. and the U.K failed to maintain the upward trend in March, with YoY% decreases of 19.9% and 2.5% respectively. Exports in major markets have reported declines, and it is believed that the value in May cannot rebound sharply.

Hong Kong Stock Connect had a net outflow of HK$1.83bn on Monday, of which Meituan (3690) had the largest net inflow of HK$715mn; followed by Yankuang Energy (1171). Tencent Holdings (0700) recorded the largest net outflow of HK$873mn; followed by China Construction Bank (0939).

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China Res Power
00836

Recently, power stocks have bucked the market and performed well, because both the cost side and the demand side tend to favor the development of the industry. On the cost side, due to the increase in renewable energy power generation in Europe, the increase in coal inventory, and the stable supply of pipeline natural gas and liquefied natural gas, these factors have made the energy supply in the international market sufficient, resulting in the influx of thermal coal in the international market into China, which has depressed domestic coal price. Market coal prices continued to decline, with the market price of 5,500 kcal fallen below the RMB900 level. In the first four months of this year, electricity consumption across the country increased by 4.7% year-on-year. In April, the electricity consumption of the country increased by 8.3% year-on-year. Economic activities have increased compared with last year, and factors such as rising temperatures have contributed to the increase in power consumption. Coupled with the favorable cost factor, investors can consider the investment value of power generation stocks, including China Res Power. Target price: $22.2; Stop- Loss price: $16.9.

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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