*Ng Lai-yin: The rebound in Hong Kong stocks is technical*
Positive news on the energy ceasefire between Russia and Ukraine led to another rebound in the Hang Seng Index today, although the gains were more modest. Ng Lai-yin, Securities Strategist at Everbright Securities International, told The Economic Times Correspondent that while the energy talks between the U.S. and Russia are certainly supportive for the market, the impact is limited as they are still at the negotiation stage and Russia has not yet made any official statement. The main reasons for the rebound in Hong Kong stocks remain the decline in U.S. long-term bond yields and the solid performance of U.S. stocks last week, which helped ease global market tensions. Although mainland Chinese stocks had a disappointing start after resuming trading last week, their subsequent performance stabilized, providing support to Hong Kong stocks, which had been approaching a downtrend.
Ng Lai-yin believes today's rebound in Hong Kong stocks is technical. As U.S. markets shift focus back to AI-related stocks, Hong Kong stocks, which have fewer such概念股, are unable to benefit from the trend. The market's attention cannot concentrate on internet and tech stocks, lacking upward momentum, thus limiting overall market performance. Although Tencent issued another announcement today stating it will issue medium-term notes, the market had already anticipated this news, so Tencent's share price only saw a slight rebound recently, with subsequent momentum remaining weak. He expects resistance for the Hang Seng Index around 24,600 points. Since the early high today was already close to this resistance zone, the rebound potential is limited. The Hong Kong market is expected to test the 24,000 level again, and may trade between 23,700 and 24,600 points in the short term.
*Johnson Electric's sharp share price drop is a one-off shock*
Johnson Electric (00179) issued a profit warning, expecting its mid-term profit for the period ending September 30 to range between US$50 million and US$58 million, representing a year-on-year decline of 56% to 62%. The group stated that the decline in profit was due to significant foreign exchange gains recorded in the same period last year, which were not repeated this period, resulting in an estimated year-on-year decrease in net profit of US$49 million to US$55 million. Additionally, pricing measures taken amid competitive market conditions, provisions, rising raw material and other input costs, and labor expenses have created operational pressures. Johnson Electric's share price plunged 17.8% during the morning session, closing at HK$13.90.
Ng Lai-yin analyzed that Johnson Electric's past performance has been relatively stable. Although profitability began declining from the fiscal year ended March 31, its fundamentals have not deteriorated significantly. Today's sharp drop in share price was mainly due to foreign exchange factors, representing a one-off shock rather than an immediate and comprehensive deterioration in fundamentals. However, this news has further intensified market concerns about its fundamentals.
Ng Lai-yin believes Johnson Electric's share price may not continue to weaken, but given that its core automotive products business has indeed seen weakening growth momentum in recent years, future business is unlikely to recover strong growth, leading to the stock's prolonged weakness. He expects the share price to remain at depressed levels recently. Short-term support could be found near last year's low of around HK$12, which may provide some technical support. The current valuation is not expensive either, so aggressive investors may consider positioning at lower levels. However, a recovery in earnings may take considerable time, and the stock price recovery will also require more time. (am)