KGI Asia Commentary

2023.09.29 09:00

HSI fell 238 points on FridayThe Hang Seng Index fell 238 points or 1.4% to 17,373 on Friday. HSTECH fell 55 points or 1.5% to 3,778 and HSCEI fell 79 points or 1.3% to 5,990. Daily market turnover was HK$80.1bn.

S&P 500 edged higher on Thursday

The Dow Jones Industrial Average jumped on Thursday as investors bought tech stocks on dips while U.S. Treasury yields paused a rise ahead of key inflation data on Friday. The Dow Jones Industrial Average rose 116.07 points, or 0.35%, to 33,666.34 points. The S&P 500 rose 0.59% to 4,299.70, just below the key 4,300 level. The Nasdaq rose about 0.83% to 13,201.28, as large technology stocks including Alphabet and Meta Platforms helped the market rebound from the recent downturn as U.S. Treasury yields fell from recent highs. Chip stocks also supported the overall rise in technology stocks. The previous rise in AMD's stock price offset the impact of Micron's stock price decline. Micron Technology shares fell more than 4% after the company reported a first-quarter loss forecast that overshadowed better-than-expected fourth-quarter results. Shares of used car retailer CarMax fell more than 13% after the company reported second-quarter earnings that fell short of Wall Street expectations. Consumer pressure is estimated to have hurt demand for used cars.

Real GDP grew at an annual rate of 2.1% in the second quarter, as expected

Final data released by the U.S. Bureau of Economic Analysis (BEA) on Thursday showed that U.S. real GDP grew at an annualized rate of 2.1% in the second quarter. The data was in line with previous estimates and market expectations. "The update primarily reflected a downward revision to consumer spending that was partly offset by upward revisions to nonresidential fixed investment, exports, and inventory investment," the BEA said. Meanwhile, Federal Reserve Chairman Jerome Powell will deliver a speech at a town hall meeting at 4 p.m. ET. The chairman will take questions from the audience, with investors eager to know whether he will walk back his hawkish comments from a week ago. Powell's speech will come a day before key inflation data is expected to show core inflation continues to slow gradually last month.

Hong Kong Stock Connect had a net inflow of HK$4.12bn on Friday, of which Meituan (3690) had the largest net inflow, reaching HK$0.60bn; followed by ICBC (1398). PetroChina (857) recorded the largest net outflow at HK$0.19bn, followed by China Mobile (941).

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CNOOC
00883

Saudi Arabia extends oil production cuts to end of 2023, while Russia said it would extend a 300,000 barrels per day export cut until the end of this year. Saudi Arabia's move will make the supply gap in the fourth quarter of this year difficult to be narrowed, and oil prices are expected to remain strong. CNOOC’s profit has always been sensitive to oil prices, and the company's cost control is effective, and therefore would benefit from a stronger oil price. The Company achieved a net oil and gas production of 331.8 million BOE in 1H23, a yoy increase of 8.9%; oil and gas sales revenue of RMB151.69bn, a yoy decrease of 14.1%; and net profit attributable to equity shareholders of the Company of RMB63.76bn, a yoy decrease of 11.3%, far better than the performance of international oil prices during the same period. The management is confident that it can fulfill its promise of paying a full-year dividend of no less than HK70 cents and a dividend payout ratio of no less than 40%. Under the current macroeconomic background, CNOOC is defensive pick which also has potential growth opportunities. Target price: $15.5; Stop- Loss price: $12.3.

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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