20221114-招银国际-China___HK_Market_Weekly_China_s_policy_adjustments_lift_sentiment_9页_1mb

China / HK Market Weekly Summary

Core Content

This weekly report provides an analysis of the performance and outlook of the Chinese and Hong Kong stock markets, highlighting the impact of policy adjustments, interest rate trends, and sector-specific movements. It also includes insights on investor sentiment, fund flows, and valuation metrics.

Main Points

Global & HK Market Performance

• Global Markets: Rallied last week (7-11 Nov) as concerns over US rate hikes eased due to lower-than-expected CPI inflation.
• HK Market: Benefited from China's adjustment in COVID control policies, with the Hang Seng Index (HSI) rising by 7.2% for the week, marking a strong rebound for the second consecutive week.
• Sector Performance: Materials and IT sectors led the gains in the HK market, while the travel and airline sector, though a clear beneficiary of policy changes, had already seen much of its performance priced in.

Interest Rates

• US Rate Hike Expectations: Cooling significantly, with the implied Fed funds rate for May 2023 dropping to 4.89% from a peak of 5.14%.
• USD Index & Treasury Yields: Both declined after the US CPI data eased rate hike fears, which is positive for risky assets, especially emerging markets and growth sectors.

China's Policy Adjustments

• COVID Control Policies: The central government introduced 20 key measures to ease restrictions, such as shortening quarantine times and limiting contact tracing.
• Real Estate Policies: The PBOC and CBIRC outlined 16 steps to support the property sector, including loan repayment extensions, which should help stabilize the market.

Stock Connect Flows

• Southbound Buying: Strengthened since early-Oct but cooled last week.
• Northbound Buying: Rebounded sharply, particularly on Friday, due to a narrowing A-H premium (from 55% to 47% MTD), although the premium remains high compared to historical levels.

Investor Sentiment

• Short-Sell Ratio: Dropped below 15% in November, the lowest since early-Jan, indicating improved sentiment.
• Fear Index (VHSI): Still remains high at above 37, even after the recent rebound in the HSI.

Key Information

Market Outlook

• China's policy adjustments are seen as a signal of greater emphasis on economic growth, which, combined with easing US rate hike concerns, could further support the HK stock market.
• The HSI broke a short-term downtrend resistance and may target around 19,000 in the coming days.

Sector Views

• Preferred Sectors: Internet & Consumer due to:
  1. Benefiting from improving China's economic outlook.
  2. Enjoying re-rating as US rate hike concerns ease.
  3. Showing strong momentum.
• Underperforming Sectors: Energy, Telecom & Utilities, which have acted as safe havens, are expected to underperform as risk appetite improves.

Earnings & Valuations

• EPS Estimates: Revised up for HSI due to RMB appreciation, but revised down for HSTECH Index (0.7%) and A-shares (0.4%).
• Valuation Metrics: The HSI's forward P/E is near 2 standard deviations below average, suggesting potential undervaluation.

Things to Watch This Week

• Monday: President Xi and President Biden will meet at the G20 Summit.
• Tuesday & Wednesday: G20 Summit.
• Tuesday: China's FAI, Industrial Production, and Retail Sales (October) data.
• Wednesday: US Retail Sales (October) data.
• Chinese Internet Giants' 3Q Earnings: Expected to provide further insight into market performance and sector trends.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months.
• HOLD: Potential return of +15% to -10%.
• SELL: Potential loss of over 10%.
• NOT RATED: No rating provided.

Industry Ratings

• OUTPERFORM: Internet & Consumer sectors.
• UNDERPERFORM: Energy, Telecom & Utilities sectors.

Disclosures & Disclaimers

• The report is not tailored for individual investors and is intended for major US institutional investors only.
• CMBIGM is not a registered broker-dealer in the US and is not subject to US regulatory requirements for research reports.
• The report is for intended recipients only and may not be reproduced, reprinted, sold, or distributed without prior written consent.
• In Singapore, the report is distributed by CMBISG, an Exempt Financial Adviser, and may only be provided to Accredited Investors, Expert Investors, or Institutional Investors.

Analyst Certification

• The analyst certifies that the views expressed in the report accurately reflect their personal opinions.
• No part of the analyst's compensation is directly or indirectly related to the specific views in the report.
• The analyst has not traded in the stocks covered in the report within 30 days prior to the report's issue and will not do so for 3 business days after.