20221024-招银国际-China_HK_Market_Weekly_Focus_turns_to_earnings_and_economic_data_9页_1mb

China / HK Market Weekly Summary

Core Content Overview

This week's report provides a comprehensive analysis of the performance of the Hong Kong and Chinese stock markets, along with global market trends, interest rate expectations, and key economic indicators. It also highlights the potential for short-term rebounds and the ongoing risks that may affect market sentiment.

Market Performance

• Last Week (17-21 Oct):

  • US stocks rebounded due to strong quarterly earnings and eased concerns about rate hikes.
  • HSI (Hang Seng Index) dropped to its lowest level since 2009, underperforming compared to global peers.
  • CSI 300 remained stable, while S&P 500 showed a positive return.
  • Consumer stocks in China and Hong Kong led declines, likely due to continued zero-Covid policies.

• Key Figures:

  • HSI: -2.3%
  • CSI 300: -2.6%
  • S&P 500: +4.7%

Interest Rates and Inflation

• US interest rate hike concerns slightly eased, with expectations of a reduced pace of hikes starting in December 2022.
• US PCE inflation data (September) is expected to be released this Friday and will be closely watched ahead of the FOMC meeting on 1-2 November.
• The implied Fed funds rate for March 2023 retreated mildly, indicating a potential slowdown in rate hikes.

Stock Connect Flows

• Southbound inflows increased further, showing continued investor interest in Hong Kong stocks.
• Northbound inflows were negative for five consecutive days, marking the largest outflows in seven months.
• Southbound net buying rebounded since September, while Northbound inflows continued to shrink.

Market Sentiment

• The HSI Volatility Index (VHSI) remains elevated at around 35, suggesting investor fear.
• Short-sell ratios on the HK mainboard stayed above 20%, indicating potential for a short-squeeze rebound.
• Consumer Discretionary, Healthcare, and Energy sectors showed the highest short-sell ratios, indicating strong bearish sentiment.

Earnings and Valuations

• Earnings estimates for HSI, CSI 300, and S&P 500 were revised downward last week:
  • HSI: -0.5%
  • CSI 300: nil
  • S&P 500: -0.3%
• Chinese consumer stocks experienced the largest downward revisions.
• RMB depreciation played a key role in the revision of HSI earnings.
• The HSI forward P/E is at 2 standard deviations below its historical average, suggesting undervaluation.
• HSI P/B (Price-to-Book) and CSI 300 P/B indicate mixed valuation levels.

Market Outlook

• Investors are likely to remain cautious over the next two weeks due to the upcoming FOMC meeting and US midterm elections.
• HK stock market is considered cheap, but no significant rerating catalysts are expected in the near term.
• A technical rebound in the HSI is possible, as it has reached the bottom of a downward channel and shows RSI Triple Divergence.
• Commodity stocks are expected to remain strong, while Consumer and Property sectors are likely to underperform due to continued zero-Covid policies and weak demand.

Key Data Points to Watch This Week

• Thursday:
  • US GDP (3Q)
  • ECB monetary policy decision
• Friday:
  • US PCE inflation (Sep)
  • UK new prime minister to be unveiled
• Chinese and US stock earnings will be closely monitored, especially from financial companies and tech giants like Apple, Amazon, Alphabet, and Microsoft.

Analyst Certification and Disclosures

• The research analyst certifies that all views expressed reflect their personal opinions and that no compensation is tied to these views.
• The analyst confirms no trading activity in the covered stocks within 30 days prior to the report and no plans to trade within 3 business days after.
• CMBIGM ratings include:
  • BUY: Potential return of over 15% in next 12 months
  • HOLD: Potential return between +15% to -10%
  • SELL: Potential loss of over 10%
  • NOT RATED: Not rated by CMBIGM
• Industry ratings include:
  • OUTPERFORM: Expected to outperform the market
  • MARKET-PERFORM: Expected to perform in line with the market
  • UNDERPERFORM: Expected to underperform the market

Disclaimer

• Investment risks are inherent, and past performance does not guarantee future results.
• No personalized advice is provided; investors are encouraged to consult with a financial advisor.
• The report is for informational purposes only and not an offer to buy or sell securities.
• CMBIGM is not a registered broker-dealer in the United States, Singapore, or the UK, and is subject to different regulatory frameworks in each region.

Conclusion

The report suggests a mixed market environment, with US stocks showing strength and HK/China markets remaining weak. While technical factors may support a short-term rebound in the HSI, earnings revisions and economic uncertainties could continue to pressure the market. Investors are advised to remain cautious and monitor upcoming key data releases and earnings reports.