20220411-招银国际-China___HK_Market_Weekly_Pricing_in_a_more_hawkish_Fed_10页_1mb

China / HK Market Weekly Summary

Core Content

This report provides a comprehensive overview of the China and Hong Kong stock markets for the week of April 4–8, 2022. It highlights the impact of the Federal Reserve's hawkish stance, regulatory changes in China, and the effects of the resurgence of the coronavirus on market performance. The report also includes analysis of fund flows, market sentiment, earnings revisions, and sector-specific insights.

Main Points

Market Performance

• Hong Kong (HSI): The Hang Seng Index declined by 0.76%, but outperformed the US market. It remained range-bound between 21100–22500 for the third consecutive week.
• A-shares (CSI 300): The CSI 300 Index fell by 1.04%, with old-economy sectors showing strength while IT, Telecom, and Healthcare underperformed.
• Sectoral Performance:
  • In HK: Property H-shares gained due to policy loosening, while IT, Consumer & Industrials underperformed.
  • In A-shares: Old-economy stocks gained, but IT, Telecom & Healthcare underperformed.

Fund Flows

• Global Fund Flow: There was a slight increase in outflows from China, driven by concerns over economic fundamentals and the virus resurgence.
• China Internet ETF (KWEB): Recorded strong inflows since March 17, indicating continued investor interest in the sector.
• US Fund Flow: US stock mutual funds saw net withdrawals due to the hawkish Fed stance.
• Stock Connect Flows:
  • Southbound Flows: Opened for only three days due to the Ching Ming Festival, with mild net inflows.
  • Northbound Flows: Net inflows decreased, with funds flowing into Banking, Capital Goods, Materials, Pharmaceutical & Biotechnology, Utilities, and Insurance, and out of Technical Hardware & Equip, Consumer Services, Food, Beverage & Tobacco, Diversified Financials, and Consumer Durables & Apparels.
  • AH Premium: Further narrowed to 41.2%, still above the 10-year average of 22%.

Market Sentiment

• Fear Index (VHSI): Rebounded to 27.1, showing increased market anxiety.
• US VIX: Also rose due to the hawkish Fed and market declines.
• Short Selling: The short sell percentage on the HK mainboard remained high, above 18%. Short sell ratios increased in Consumer Staples and Materials, while Property saw a decrease.

Earnings & Valuations

• Earnings Revisions:
  • HSI: Revised down by ~2% in FY21.
  • HSTECH: Revised down by ~6% in FY21.
  • CSI 300: Revised down by <1% in FY21.
• Sector Earnings:
  • In HK: Commodities saw upward revisions, while Healthcare & Consumer Discretionary were revised down.
  • In A-shares: Real Estate earnings estimates were slashed.
• Valuation Metrics:
  • HSI forward P/E is near the low end of its range and 1 standard deviation below the 10-year average.
  • CSI 300 P/E is near the 10-year mean, suggesting it is not significantly undervalued.
  • HSI P/B is below 1, lower than previous crisis troughs.
  • CSI 300 P/B is around 2.
  • Most HSCI sectors are near their valuation troughs.

Sector Views

• Internet Sector: Expected to see further upside in the short term due to improved Q2 earnings expectations and regulatory changes easing delisting risks.
• Infrastructure-Related Sectors: Capital Goods & Cement could benefit from accelerated infrastructure spending.
• Commodity Stocks: Viewed as bearish due to rising optimism about a Russia-Ukraine ceasefire and potential Fed tightening impacting commodity prices.
• Energy Stocks: Gained due to upward revisions in earnings estimates.
• Healthcare & Consumer Discretionary: Underperformed due to earnings revisions and market sentiment.

Key Information

• Market Volatility: Increased due to the hawkish Fed stance and the resurgence of the virus in China.
• Regulatory Impact: The introduction of normative regulation in the live broadcast sector and policy loosening in property markets influenced investor sentiment.
• Investor Behavior: Despite global outflows, China internet ETF attracted significant inflows, indicating confidence in the sector.
• Valuation Outlook: The HSI appears undervalued based on P/E and P/B metrics, while the CSI 300 is closer to its 10-year average.

Analysts

• Daniel So, CFA and Bingnan Ye, Ph.D are the analysts responsible for this report.
• Contact details are provided for both analysts.

Disclaimer & Disclosures

• The report is not investment advice and should be used for informational purposes only.
• CMBIGM and its affiliates may have investment banking relationships with the companies mentioned.
• The report may include conflicts of interest and is not guaranteed in accuracy or completeness.
• It is intended solely for intended recipients and may not be reproduced or distributed without permission.
• Specific restrictions apply to recipients in the UK, US, and Singapore, with different legal requirements for distribution and use.

CMBIGM Ratings

• BUY: Potential return of >15% over 12 months.
• HOLD: Potential return of +15% to -10% over 12 months.
• CE: Loss of >10% over 12 months.
• SELL: Potential loss of >10% over 12 months.
• NOT RATED: No rating provided.
• OUTPERFORM: Industry expected to outperform the broad market.
• MARKET-PERFORM: Industry expected to perform in line with the broad market.
• UNDERPERFORM: Industry expected to underperform the broad market.

CMB International Global Markets Limited

• A subsidiary of China Merchants Bank.
• Located in Hong Kong with contact details provided.

Important Disclosures

• Risks Involved: All investments carry risk, and past performance does not guarantee future results.
• No Individual Advice: The report does not provide personalized investment advice.
• Liability Disclaimer: CMBIGM is not liable for any losses arising from reliance on the report.
• Use Restrictions: Report is for intended recipients only and may not be shared without consent.