20220808-招银国际-China_HK_Market_Weekly_HSI_range-bound_with_earnings_bottoming_out_9页

China / HK Market Weekly Summary

Core Content

This document provides a weekly market analysis of the China and Hong Kong stock markets, focusing on recent performance, sector trends, sentiment indicators, earnings data, and future outlook. It also includes information on fund flows, valuation metrics, and important disclosures regarding the research and its limitations.

Main Views

• Market Performance:

  • The Hong Kong Hang Seng Index (HSI) was directionless in the first week of August, rebounding by 0.23%.
  • The CSI 300 Index fell by 0.32%.
  • Growth stocks (IT, Consumer & Healthcare) outperformed Value stocks (Energy, Real Estate) in both H-shares and A-shares.
  • China Internet ETF (KWEB) experienced outflows for the fourth consecutive week.

• Interest Rates:

  • Implied Fed fund rates rose after a strong US non-farm payrolls report, but US inflation expectations fell.
  • The aggregate balance maintained by Hong Kong commercial banks with the Hong Kong Monetary Authority (HKMA) dropped to HK$129bn, potentially leading to higher lending rates if it falls below HK$100bn.

• Sentiment:

  • The "Fear Index" (VHSI) retreated to a five-month low, indicating improved sentiment.
  • The short-sell ratio on the HK mainboard dropped to below 18%.
  • Sector-specific short-sell ratios showed mixed trends, with declines in Energy, Materials, and Healthcare, and increases in Property, Utilities, and Consumer Staples.

• Earnings:

  • The HSI's FY22E EPS consensus was revised up by 1.1% to a two-month high, driven by HSBC's upbeat 2Q earnings.
  • In HK, Financials and Energy sectors saw upward revisions, while Healthcare, Consumer Discretionary, and Materials sectors saw downward revisions.
  • In the US, FY22E EPS estimates for the S&P 500 fell by 1.0% from a month ago, with 58% of companies issuing negative guidance for 3Q 2022.

• Market Outlook:

  • The HSI is expected to remain range-bound in the short term, supported by improving earnings estimates but capped by China-US tensions, US rate hike expectations, and housing market risks.
  • Chinese Consumer stocks may extend their recent outperformance due to policy support emphasis by the State Council.
  • Caution is advised for the Property and Banking sectors until substantial supportive housing policies are announced.

Key Information

• Valuation Trends:

  • Both HK and US stocks' P/E ratios have moved closer to their 10-year means.
  • The HSI's forward P/E is at 1 standard deviation below the 10-year mean, while the CSI 300's forward P/E is above the 10-year mean.
  • Many HSCI sectors are still at historical lows in terms of P/E ratios.

• CMBIG Ratings:

  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10% over next 12 months.
  • SELL: Potential loss of over 10% over next 12 months.
  • NOT RATED: Not rated by CMBIGM.
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

• Disclosures:

  • The research analyst certifies that the views expressed reflect personal opinions and that there are no conflicts of interest.
  • CMBIGM does not provide individually tailored investment advice and recommends consulting a professional financial advisor.
  • The report is not an offer or solicitation to buy or sell securities and is intended for specific institutional investors.
  • The information is based on publicly available data and is not guaranteed for accuracy, completeness, or timeliness.

Conclusion

The China and Hong Kong markets showed mixed performance and sentiment in the first week of August. Growth stocks led gains, while Value stocks declined. Earnings estimates for the HSI improved, suggesting a possible bottoming out, but the market remains cautious due to external risks such as China-US tensions and US rate hikes. Consumer stocks are expected to continue outperforming, while Property and Banking sectors remain under scrutiny until supportive housing policies are announced. Investors are advised to remain cautious and seek professional guidance.