20220913-招银国际-China___HK_Market_Weekly_Short-term_rebound_but_upside_limited_9页_1mb

China / HK Market Weekly Summary

Core Content

This report provides an overview of the performance and outlook for the Hong Kong and Chinese stock markets during the week of 2-9 September. It highlights the impact of global macroeconomic factors, particularly US inflation data and Fed rate hike expectations, on market sentiment and valuations. Additionally, it discusses sectoral performance, fund flows, and short-selling dynamics, offering insights into potential investment opportunities and risks.

Main Points

Market Performance

• HK Stock Market (HSI): Underperformed last week due to concerns over Fed rate hikes and RMB depreciation. However, it staged a short-term rebound on Friday, possibly driven by short-squeeze and technical oversold conditions.
• Global Markets: US stocks (S&P 500) rose by 3.7%, while Chinese stocks (CSI 300) increased by 1.7%, and HSI fell by 0.5%.
• Sectoral Gains: Materials and Property sectors in HK showed positive performance. In contrast, Energy and Real Estate sectors in China continued strong runs.

Valuation and Price Trends

• HSI Valuation: The forward P/E of HSI dropped to a level near the 10-year mean minus one standard deviation, indicating strong downside protection.
• P/B Ratio: The P/B ratio of HSI reached a decade-low of 0.78x, suggesting undervaluation.
• AH Premium: Narrowed by 1.8 points last week, indicating convergence between Hong Kong and A-shares.

Interest Rates

• Fed Rate Hikes: Expectations of further rate hikes intensified, with the implied Fed funds rate for 1Q23 reaching 4%.
• HKMA Balance: The Hong Kong Monetary Authority’s aggregate balance remained around HK$125bn, with potential for commercial banks to raise lending rates if it drops below HK$100bn.

Fund Flows

• Southbound Inflows: Remained mild, with a slowdown in net buying since July.
• Northbound Inflows: More volatile, with a similar trend of reduced net buying since July.
• Stock Connect: The cumulative inflows over the past 12 months showed a trend of fluctuation.

Sentiment and Short-Selling

• Short-Sell Ratio: Reached a record high of 22.9% on 30 August but retreated to 18.4% last week.
• Sectoral Short-Selling:
  • Financials, Info Tech, Consumer Discretion, and Property sectors saw high short-sell percentages.
  • Consumer Staples and Materials sectors showed lower short-sell activity, indicating improved sentiment.

Market Outlook

• Short-Term Rebound: The HSI may continue its rebound due to short-squeeze and technical oversold conditions, though the upside is expected to be limited.
• Sectoral Views:
  • Consumer Staples: Likely to benefit from easing margin pressure.
  • Property and Banking: Remain cautious due to ongoing risks in the property market.
• Earnings Estimates: EPS estimates for HSI and HSTECH Index were affected by changes in constituents, while A-shares saw a 0.4% downward adjustment.

Key Information

• Upcoming Data: Investors will monitor US and European inflation data, US retail sales, and China’s retail sales, industrial production, and FAI.
• CMBIGM Ratings:
  • BUY: Stocks with potential return of over 15%.
  • HOLD: Stocks with potential return between +15% to -10%.
  • SELL: Stocks with potential loss of over 10%.
  • Industry Ratings: OUTPERFORM, MARKET-PERFORM, and UNDERPERFORM indicate expectations relative to market benchmarks.

Analyst Certification

• The research analyst certifies that the views expressed in the report reflect their personal opinions.
• No part of the analyst’s compensation is directly 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 within 3 business days after.

Disclosures and Disclaimers

• Risks: There are inherent risks in trading securities, and past performance does not guarantee future results.
• Disclaimer: The report is for informational purposes only and not investment advice. Investors are encouraged to consult financial advisors.
• Legal Responsibility: CMBIGM assumes no liability for losses incurred from reliance on the report.
• Distribution Restrictions: The report is distributed only to specific institutional investors and may not be shared with others without consent.

Conclusion

The HK stock market is expected to have a short-term rebound, supported by technical indicators and short-squeeze effects. However, the upside is limited due to ongoing concerns about Fed rate hikes and RMB depreciation. Valuation levels suggest potential downside protection, but caution is advised in sectors like Property and Banking. Investors should monitor upcoming economic data and consider the risks associated with market fluctuations.