Weekly Report | Focus on The US Debt Ceiling Discussion And PCE This week; HK Internet And Pharmaceutical Companies Are Recommended
Column Introduction:
The following content is credited to the Wealth management research team of VBrokers. VBrokers is an investment service platform for Hong Kong and US stocks under Sina Group and Weibo.
The team specializes in conducting extensive research on trends, preferences, and capital flows in the Hong Kong and US stock markets. With a keen focus on key industries and companies, the team generates insightful reports on investment strategies, including weekly, monthly, quarterly, and individual stock assessments.
Core Views of the Week
In the short term, the US government's debt ceiling and economic data are still the most important points to watch in the market this week.
- Last week, the seasonally adjusted month-on-month growth rate of US retail sales in April increased by 0.4%, which is consistent with the stable growth pace of the US employment market in April.
- Wage growth still supports consumption, even though there are more obvious signs of weakening in the commodity retail industry, but catering services achieved higher growth rates.
- The expectation of future inflation cooling still needs to be further observed, and reference to this week's PCE data.
- In history, as the debt ceiling approaches, the market's risk aversion increased, while risk assets fell and safe-haven assets rose. The specific performance expectations are that short-term and soon-to-mature long-term US Treasury yields will rise due to default risk, and long-term US Treasury yields and safe-haven assets such as gold will increase.
- This week, in addition to focusing on the debt ceiling discussion, the PCE price index on Friday is the key point, which is related to the direction of the interest rate resolution in June. We believe that although the US PCI and PPI have cooled down, core inflation continues to remain high, and the probability of a Fed rate cut in the second half of the year is low. And the US dollar index may remain strong.
- The offshore US dollar to Chinese yuan exchange rate has broken 7, and the short-term trend of the Chinese yuan is lower than market expectations. The Hong Kong stock market continues its downward trend, with closing points below the 250-day moving average. There were three days in the week with a turnover of less than 100 billion yuan, which continued to be lower than the daily average of 119.6 billion yuan in the year. The trading volume is shrinking, the degree of capital participation is in a negative cycle, and there is a strong atmosphere of cautious observation among investors. The weak economic recovery in China and the Fed's pace of raising interest rates limited the valuation repair of Hong Kong stocks.
Investment Recommendations for the Week
- We recommend Hong Kong Internet companies that are at historical low valuations, as well as pharmaceutical companies that benefit from the coverage of essential drug catalogs and the landing of innovative achievements.
- For essential drug catalogs and traditional Chinese medicine, we recommend focusing on CR Pharma (03320.HK) and Tong Ren Tang Technology (01666.HK). For innovative drugs, we recommend focusing on BeiGene (06160.HK), ZAI LAB (09688.HK), AKESO (09926.HK), etc.
- The price of gold fell against the backdrop of the US dollar's strong rebound, and was affected by the news fluctuations of the debt ceiling negotiation in the short term.
- The time for maintaining high interest rates may exceed previous optimistic expectations, coupled with concerns about the debt ceiling, and maintaining the expectation of rising short-term interest rates in the United States, with the US long bonds having a better safe-haven property.
Risk Warning: US economic recession, Chinese economic data, rising coal prices, Chinese medical policies.
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