KGI Asia Commentary

2023.06.09 09:00

HSI rose 47 points on Thursday

The Hang Seng Index rose 47 points or 0.2% to 19,299 on Thursday. HSTECH fell 26 points or 0.7% to 3,894 and HSCEI fell 1 points or 0.0% to 6,540. Daily market turnover was HK$84.4bn.

Dow ends higher as tech outperforms after U.S. Treasury yields fall

The Dow ended higher on Thursday as tech stocks resumed gains, supported by a drop in U.S. Treasury yields, after data showed initial jobless claims jumped to a 20-month high, fueling expectations the Federal Reserve will pause interest rate hikes next week. The Dow Jones Industrial Average rose 0.5%, or 168 points, the Nasdaq rose 1%, and the S&P 500 gained 0.6%. Aside from Alphabet, shares of big tech companies rose, led by Apple Inc, Meta Platforms Inc and Microsoft Corp, which announced it would provide its chatgpt-based artificial intelligence model to U.S. government agencies. Shares of Adobe Systems Inc., which launched an enterprise-grade product for its artificial intelligence art tool Firefly, rose nearly 5 percent and said it was working with businesses to explore how the tool could help reduce costs and increase efficiency. The announcement comes a week before Adobe will release its second-quarter results on June 15. Tesla also pushed the broader market higher after reports that the electric car maker was in talks with Spanish government officials to build a $4.8 billion Gigafactory in Valencia, Spain.

Jobless claims rise more than expected, hit highest level since October 2021

New data on Thursday showed initial jobless claims hit the highest level since October 2021, pointing to possible softening in the labor market. Initial jobless claims rose 28,000 to a seasonally adjusted 261,000 for the week ended June 3, the Labor Department said on Thursday. Continuing claims fell by 37,000 to 1.757 million. The rise in initial jobless claims has raised hopes that the Federal Reserve will pause its rate hikes at its meeting next week. The odds of no rate hike rose to 73.6% after the data, from about 65% before the data, according to CME Group.

Hong Kong Stock Connect had a net inflow of HK$4.0bn on Thursday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$3.2bn; followed by HSCEI ETF (2828). CCB (939) recorded the largest net outflow at HK$0.59bn, followed by Meituan (3690).

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BYD announced that its sales volume grew 95.7% to 100.2k units over the first five months of this year. Despite the price cut of the industry, BYD’s sales was better than expected, as it has a competitive brand and price positioning. At the same time, the gross profit margin has increased due to the decline in lithium prices. The GPM of BYD was at 17.9% in 1Q23, an increase of 5 percentage points compared to 1Q22. Looking ahead, the drop in lithium prices may lead to further improvement in gross profit in the second quarter, and the launch of BYD's new car models can further improve the product mix. The sales target of BYD for this year is 3 million vehicles, including overseas and mainland markets. Based on last year's overall sales volume of approximately 1.868 million vehicles, it is expected to increase by more than 60% year-on-year. Although the price war is the market concern, BYD's quarterly results and the customer feedback of the Shanghai Auto Show reflect that BYD is able to stand out from the crowd with its own strategy. Target price: $285; Stop- Loss price: $210.

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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