Weekly Report | Hot Summer Boosts 618 E-Commerce & White Goods, Amid Divergent Data Trends: What to Look For?
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
- The White House needs to rebuild TGA and issue bonds, potentially affecting market liquidity.
- FOMC is unlikely to raise interest rates in June
Although the one-year CDS in the United States has quickly fallen, the US government needs to rebuild the Treasury General Account (TGA) in the short term, which will absorb market liquidity through a large amount of debt issuance, if investors in money market funds do not convert to short-term debt, which will put pressure on market liquidity in the short term.
We believe that the June FOMC meeting will not raise interest rates, and maintaining high-interest rates to suppress inflation may be a better choice in the future. This will also help reduce the risk of recession or the controllability of a mild recession, creating a favourable investment environment. The logic of the Federal Reserve nearing the end of rate hikes will limit the rebound of the US dollar and ease the pressure of yuan depreciation, which will restart the valuation repair of Hong Kong stocks.
- US non-farm jobs in May surpassed expectations with 339,000 added, mainly due to the service sector's performance.
- Unemployment rate contradicts trend due to increased job supply.
On June 2, the US added 339,000 non-farm jobs in May, better than 190,000 expected, and the previous reading was also revised up to 294,000 from 253,000. The better performance of the service sector, which added 257,000 jobs, up from the monthly average of 130,000 in the three years before the pandemic, was the main reason for the better-than-expected US non-farm payrolls. The number of unemployed rose sharply by 440 thousand (vs 180 thousand last). The unemployment rate contradicts the trend of higher nonfarm payrolls, which we attribute to increased job supply and the return of workers to the labour market.
- China's manufacturing PMI fell for three consecutive months in May, remaining below 50 for two months.
- Fiscal and monetary policy may stabilize growth.
China's manufacturing purchasing managers' index, non-manufacturing business activity index and composite PMI output index came in at 48.8%, 54.5% and 52.9% in May, respectively. The manufacturing PMI was lower than 49.2 in April, falling for three consecutive months and remaining below 50 for two consecutive months.
The continuous contraction of the manufacturing industry is more obvious, and the expectation of economic growth pressure limits consumer demand.
We believe that the tightening of fiscal policy and the loosening of monetary policy will become means of stabilizing growth in the second half of the year, and the new policy of the real estate industry will form a combination of measures.
- There may be an opportunity for short-term gains.
- challenge remains on whether the 20-day moving average and trading volume can support the rebound.
Last Wednesday, Hong Kong stocks buttoned out to 18044, and the trading volume expanded to 170.9 billion. On Friday, a rebound occurred, reaching 18,620 points (4.02%) with a trading volume of 149.1 billion.
We are still focusing on whether the trading volume can surpass the daily average of 118.4 billion this year.
As we mentioned last week, there is an opportunity for short-term gains below 18,500 points, and the challenge this week will be whether the 20-day moving average of 19,330 points and trading volume can support the rebound.
Investment Recommendations for the Week
- China's recovery will attract investors.
- Watch for US jobless claims and China's CPI and PPI.
The new non-farm employment is evidence of the sound fundamentals of the US economy in the short term, and the US dollar index is supported.
The weak official manufacturing PMI of China in May accelerates the depreciation pressure of the CNY against the US dollar.
Affected by the rebound of the US dollar index, the decline of Hong Kong stocks is related to the outflow of part of foreign capital, and foreign capital is in a state of lack of confidence or hedging in the Hong Kong stock market.
We expect the combination of China's economic recovery and policy in the second half of the year to be a sure thing, and investors will return to the Hong Kong stock market when they observe a clear trend of improvement in China's economy or US dollar weakness. Pay attention to the US initial jobless claims for the week of June 03 and continuing jobless claims for May 27 released on June 8 (Thursday), and China's CPI and PPI for May released on June 9 (Friday).
- Watch out for JD.com and Haier Smarthome.
Also, keep an eye on JD Group (9618.HK) and Haier Smart Home (6690.HK).
Risk Warning: Policy implementation less than expected; external demand slows down.
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华盛本周策略 | 中外数据冰火两重天，关注炎热天气预期下618电商及白色家电销售
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