KGI Asia Commentary

2024.09.06 10:00

Hang Seng Index fell 13 points on Thursday

The Hang Seng Index closed at 17,444 points for the day, down 13 points or 0.1%. The Hang Seng Technology Index reported at 3,487 points, up 4 points or 0.1%. The HSCEI Index fell 28 points, or 0.5%, to 6,105 points. The market turnover was HK$84.9billion.

 

S&P 500 slides ahead of jobs report on fresh economic worries

U.S. stocks fell on Thursday as investors sold risk assets and worries about the U.S. economic outlook grew ahead of Friday's jobs report. The S&P 500 fell 0.3% to close at 5,503.41 points; the Dow Jones Industrial Average fell 219.22 points, or 0.54%, to close at 40,755.75 points. The Nasdaq rose 0.25% to close at 17,127.66 points, after rising as much as 1.2% during the session. Verizon shares fell slightly after it agreed to acquire Frontier Communications for $20 billion. The move is expected to help the telecom giant grow its fiber optic network to compete with rivals including AT&T. Shares of U.S. Steel rose more than 2%, recouping some of its losses after Wednesday's sharp decline. There are reports that US President Joe Biden will block Japan's Nippon Steel's $14.9 billion acquisition of the US steelmaker due to national security concerns. Hewlett Packard Enterprise fell 6% as its results and fourth-quarter growth were overshadowed by lower margins as mix shifted to servers. Shares of JetBlue Airways Corp rose more than 6% as it raised its third-quarter performance forecast. The company expects third-quarter revenue to grow by -2.5% to 1% from the same period last year. This compares with expectations that the revenue ratio would fall by 5.5% to 1.5%. Tesla shares rose 4% after the electric car maker said it would launch advanced driver assistance systems in Europe and China in the first quarter of 2025.

 

ADP employment data falls short of expectations, focus turns to Friday's payrolls data

US private payrolls was lower than expected in August, raising concerns about the health of the economy. According to data, private payrolls increased by 99,000 in August from a downwardly revised 111,000 in July. This is the weakest month since January 2021. Economists had expected 145,000. The market is now turning its focus to employment data to be released on Friday.

Hong Kong Stock Connect had a net outflow of HK1.59bn on Thursday of which ICBC (1398) had the largest net inflow, reaching HK$0.25bn; followed by Kuaishou (1024). Tracker Fund (2800) recorded the largest net outflow at HK$1.61bn, followed by CSOP HS TECH (3033).

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Benefiting from the fact that the interest rate hike cycle is coming to an end, this could help alleviate the borrowing costs. The group's net debt ratio is relatively higher compared to other local utility stocks, exceeding 45% at the end of last year. On the operational front, the Two Power Companies' profit control agreement is for a 15-year period, with a permitted return of 8% on average net fixed assets. As long as future capital expenditures increase, the allowed profit may have the opportunity to increase. Group operating earnings before fair value movements increased 22.0% to HKD5,683mn for 1H24 thanks to a solid performance across the Group along with an improved earnings contribution from EnergyAustralia, more than offsetting the lower generation volumes from the two nuclear power plants in Mainland China due to planned outages. Second interim dividend of HKD0.63 per share, same as 2023, was declared by the Board. CLP's dividend has continued to be stable, making it suitable for dividend earning purpose. The total dividend per share has remained unchanged at HKD3.10 over the past few years. Currently, the dividend yield is slightly lower than other local utility stocks, so we recommend using average dollar costing method for this stock. Target price: $73; Stop- Loss price: $60.

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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