KGI Asia Commentary

2023.05.22 09:00

HSI fell 277 points on Friday

The Hang Seng Index opened 192 points lower and closed at 19,535 points. The decline extended to 374 points and closed at 19,451 points, down 277 points. The China Enterprises Index fell 122 points, or 1.8%, to 6,594 points; the Hang Seng Technology Index fell 95 points, or 2.4%, to 3,822 points. The market turnover  was HK$ 95.2 bn. After Alibaba (9988) announced its quarterly results last night, its share price retreated 6% to HK$82.45. China Mobile (941) bucked the trend and rose 1.2% to HK$66.4.

Debt Ceiling issue remains

The U.S. Republican negotiators temporarily withdrew from Friday's debt ceiling negotiations, and the market was skeptical about the earlier rumors that an agreement would be reached. U.S. stocks closed down on Friday. The Dow Jones Industrial Average fell 109 points, or 0.3%, to 33,427; the Nasdaq fell 31 points, or 0.2%, to 12,658; the S&P 500 fell 6 points, or 0.1%, to 4,192.

In addition to the debt issue, the market continues to focus on the outlook for the Federal Reserve's monetary policy. Powell again proposed that inflation is much higher than the 2% target. In view of credit pressure, there may be no need to continue to raise interest rates, but he pointed out that if the fight against inflation fails, it will cause long-term pain. In addition, it also pointed out that the current policy tightening has made great progress, and the policy stance is restrictive, and there is uncertainty about the lagging effect of tightening and the degree of credit tightening caused by the pressure on the banking system.

Chinese express companies continue to focus on growing market share

At present, Chinese express companies are gradually widening the gap. As of May 18, SF Express, ZTO, YTO, STO, and Yunda, the five companies had revenues of RMB 102.1 billion and net profits of RMB 4.79 billion. Leading express delivery companies continue to focus on growing market share as their primary goal. ZTO Express (2057) share in the first quarter increased by 1.8 percentage points to 23.4%. At the same time, it also raised the annual business volume of this year to 20-24%, an increase of 2 percentage points compared with last year's annual results announcement. Investor could closely following the develop of the leading company of the industry

Hong Kong Stock Connect had a net inflow of HK$778 mn on Friday, among which China Mobile (941) had the largest net inflow of HK$320 mn; followed by China Shenhua (1088). Tracker Fund (2800) recorded the largest net outflow of HK$1.68 bn; followed by Tencent (700).

Recommended Stocks
Capture the moment and trade with KGI Asia's insights
Stocks
Recommended
Stocks
Recommended

The net operating income before change in expected credit losses and other credit impairment charges of HSBC was USD20.17bn in 1Q23, a yoy increase of 63.9%, and a qoq increase of about 38.5%. During the period, it has USD1.5bn came from acquisition gains and USD2.13bn from the reversal of impairment losses from French retail banking business. Excluding this part, the operating income increased by approx. 34.3% yoy and 13.5% qoq. Revenue increased by 64% to USD20.2bn. The increase was driven by higher net interest income in all of its global businesses due to interest rate rises. Net interest margin of 1.69% increased by 50bps compared with 1Q22, and by 1bps compared with 4Q22. The return on tangible equity was 19.3% (excluding one-off income), excluding the impact of strategic transactions. HSBC have announced its first quarterly dividend since 2019 of $0.10 per share, as well as a share buy-back of up to $2bn. It also expects to have substantial future distribution capacity for dividends and share buy-backs. Its current CET1 ratio is at 14.7%, increased by 0.5 percentage points compared with 4Q22. The current intention of the bank is to manage the CET1 ratio within its medium-term target range of 14% to 14.5%, with a dividend payout ratio of 50% for 2023 and 2024, excluding material notable items. HSBC's quarterly results beat expectations, together with the resumed distribution of quarterly dividends. The market reacted positively to the result and the company guidance. Target price: $72; Stop- Loss price: $55.

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.

The materials contained herein are provided by KGI Asia Limited ("KGI") for information only. While such materials are based on or derived from sources believed to be reliable, KGI makes no representation or warranty (express or implied) as to their accuracy or reliability. Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or solicitation of an offer to buy or sell any securities or investments. KGI and its officers, employees, agents and affiliates may have interests in the securities or investments covered herein and accept no liability whatsoever for any loss or consequence whatsoever (whether direct or indirect) resulting from any use of or reliance by you on such materials.