KGI Asia Commentary

2024.08.27 10:00

Hang Seng Index rose 186 points on Monday

The Hang Seng Index closed at 17,798 points for the day, up 186 points or 1.1%. The Hang Seng Technology Index reported at 3,502 points, up 34 points or 1.0%. The HSCEI Index rose 59 points, or 1.0%, to 6,278 points. The market turnover was HK$83.5billion.

 

Dow closes at record high, cyclical stocks outperform amid tech rotation

The Dow closed at a record high on Monday as cyclical stocks including financials regained favor and technology stocks began to retreat ahead of widespread expectations for a Federal Reserve interest rate cut next month. The Dow Jones Industrial Average rose 65 points, or 0.16%, to a record 41,240.52 points. The Nasdaq closed down 0.8% and the S&P 500 fell 0.3%. Technology stocks got off to a bad start this week as investors exited growth sectors, with Nvidia falling 1% ahead of this week's quarterly results. Apple shares were slightly higher as anticipation grew for the iPhone maker's upcoming product launch event on September 9, where many expect it to unveil new iPhones and Apple Watches. Meanwhile, Micron Technology shares fell more than 3%, with Needham lowering his price target on the stock to $140 from $150, citing concerns about demand. In terms of Chinese technology stocks, PDD Holdings reported second-quarter revenue that was lower than analysts' expectations, and the company's stock price fell 28%. The decline in technology stocks came as cyclical sectors including financials rebounded on expectations that such stocks could benefit significantly from interest rate cuts. Financial stocks hit 52-week highs on Monday.

 

Both oil and gold prices went up

Oil prices rose on Monday, amid reports of a production halt in Libya and after Israel and Hezbollah traded a barrage of strikes across the Lebanon border. Meanwhile, gold prices also rose on Monday, closing in on its recent all-time high, driven by widespread expectations for lower interest rates in September following Federal Reserve Chairman Jerome Powell's dovish announcement, as well as risk aversion from geopolitical risks in the Middle East. need.

Hong Kong Stock Connect had a net outflow of HK0.04bn on Tuesday of which China Mobile (941) had the largest net inflow, reaching HK$0.11bn; followed by Sinopec (386). Tracker Fund (2800) recorded the largest net outflow at HK$0.33bn, followed by Tencent (700).

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Meituan will release its interim results on Aug28. In the context of stabilizing market competition, Meituan's adjusted EBITDA for 2Q24 is expected to grow 58.4% yoy to RMB12.01bn. Revenue is expected to grow 18.3% yoy to RMB80.42bn, with the core local commerce segment growing 17.0% yoy to RMB59.9bn and the new business segment growing 22.6% yoy to RMB20.55bn. In the new business segment, the effects of the management's strategic shift towards reducing losses have been significant, with the expected quarterly loss to be reduced to RMB2.12bn (Q1 2024 loss: RMB2.75 bn; Q2 2023 loss: RMB5.19 bn). Investors will focus on the latest operational guidance provided by Meituan's management, including growth in food delivery transactions and unit economics (UE), competition and profitability in the in-store business, whether operating profit margin has reached the bottom, and the latest updates on KeeTa’s overseas market expansion plans. Target price: $117; Stop- Loss price: $100.

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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