In line with the overnight drop in US equities, Hong Kong stocks have tumbled to their lowest levels in 2023, according to MIB Securities (HK) Ltd.
MIB stated in its Dim Sum Daily’s general market commentary, the decline in US equities came after a better-than-expected job report.
Market expectations that the Federal Reserve will maintain elevated interest rates in the short term to combat inflation.
Maybank anticipates a 25 basis points (bps) increase during the upcoming November Federal Reserve meeting.
The Hang Seng Index experienced a significant drop of 135 points (pts), closing at 17,195pts, with a relatively low daily turnover of HKD 7.6 billion (RM 4.58 billion).
Looking ahead, MIB anticipates the Hang Seng Index to find technical support levels at 16,800pts and 16,000pts in the near term.
US House Speaker ousted
Meanwhile, in Maybank’s latest “Global Markets Daily” report, it highlighted that US House Speaker Kevin McCarthy faced an unexpected ousting by fellow Republicans.
This surprising turn of events stemmed from dissatisfaction among his party members regarding his compromise with Democrats on the stop-gap measure to fund the government until Nov 17.
This development raises concerns about the potential for another economic risk event, as the likelihood of both sides reaching an agreement before a government shutdown on that date appears more challenging.
Despite these concerns, Maybank maintains its belief that the Federal Reserve will proceed with a rate hike in November.
Additionally, an unforeseen increase in job openings for August briefly boosted the US Dollar Index (DXY index) to its intra-day peak.
While the DXY index later retreated from its highs, the yield on the US 10-year Treasury (UST 10y) continued to rise throughout the overnight session, reaching approximately 4.80%.
This upward movement in the long end of the UST curve suggests a growing positioning for a higher neutral rate. This shift is noteworthy, considering the resilience of the US economy in the face of significant interest rate hikes.
China’s Golden Week Updates
In another MIB’s updates on China’s Golden Week, China’s domestic travel is surpassing pre-Covid levels.
In the week ending Oct 1, domestic flights within China saw a notable 8.1% week-over-week (WoW) increase, rebounding to an impressive 106% of the flight activity observed in 2019. This surge coincided with the start of the Golden Week holiday.
Notably, domestic flights originating from Beijing exceeded pre-Covid levels, reaching 125%.
Similarly, flights from Shanghai, Guangdong, and Hainan also outpaced 2019 figures, reaching 107%, 110%, and 117%, respectively.
On outbound travel, capacity constraints continue.
As of Oct 3, data from OAG indicates that weekly non-domestic passenger capacity, measured by available seat kilometers (ASK), has only returned to 49% of its pre-Covid levels in 2019.
Market estimates suggest that ASK capacity on routes to Japan, Korea, and Thailand has reached 45%, 62%, and 43% of 2019 levels, respectively.
Looking ahead, it is anticipated that China’s non-domestic air capacity will gradually recover to 70% to 80% by the end of the fourth quarter in 2023 (4Q’23).
During the initial three days of the Golden Week holiday, offline duty-free sales in Hainan amounted to RMB426 million (RM279.31 million), marking a substantial 40.3% year over year (YoY) increase.
Furthermore, the number of duty-free shopping customers surged to 61,600, representing an impressive 84.1% increase YoY.
On average, each passenger spent RMB6,900, which corresponds to 85% of the daily average spending seen during the 2021 Golden Week holiday.
While this is slightly lower than the 95% recovery rate observed from April to July 2023, it indicates a robust resurgence in consumer spending.
China new energy vehicle (NEV) registered a strong September sales growth
Most Chinese NEV OEMs released strong sales delivery volume in September, posting YoY pickup as follow:
- Nio-SW (9866 HK) delivered 15,600 units in September, a 44% increase YoY;
- XPeng-W (9868 HK) September NEV sales volume totalling 15,300, increase 81% YoY;
- Li Auto-W (2015 HK) September sales volume was 36,000, increase 213% YoY, outperforming its peers;
- GAC Aion, under GAC Group (2238 HK), recorded 51,500 units in September, increase 72% YoY;
- Zeekr, under Geely Auto (175 HK), September sales deliveries amounted to 12,000 units , 46% increase YoY;
- BYD (1211 HK) the total number of NEV sold totalling 287,000 units, a 42.8% increase YoY.
