The Economic Information Daily (14th) reported that New York Fed President Williams reiterated his expectation of two rate hikes this year. U.S. stocks fell across the board on Tuesday (13th), with memory chip stocks sold off and mixed earnings from major banks dragging down the market. The Hang Seng Index opened lower, but technology and internet stocks strengthened during the session, reversing to close up 9 points or 0.2% at 24,384. The Hang Seng China Enterprises Index closed at 8,195, up 20 points or 0.3%. The Hang Seng Tech Index rose 66 points or 1.6% to 4,203. Half-day turnover on the main board was only HK$86.7 billion, with net inflow via the Stock Connect reaching HK$30 billion.
*Lien King Hon: HSI stabilizes at 24,000 but meets resistance at 20-day MA*
Mainland China's September CPI rose 0.9% year-on-year, slightly below the expected 1%, but expanded 0.1 percentage point compared to August. Hong Kong stocks initially declined in the morning session but later rebounded, especially after the release of the inflation data. The HSI recovered from an intraday low of 24,115 to a high of 24,451, gaining over 300 points, and maintained gains before the midday break. In recent trading sessions, the HSI has not broken below previous lows and has held above 23,800. Lien King Hon, council member of the Hong Kong Securities Analysts Association, told The Economic Information Daily that the recent stabilization near 24,000 corresponds roughly to the 0.618 Fibonacci retracement level of the previous peak between late June and early August. Successfully defending this level shows some underlying support in the Hong Kong market. However, the rebound stalled near the 0.5 retracement level around 24,400 and the 20-day moving average near 24,500, suggesting that although the HSI has stopped falling, the rebound lacks strength. He expects clearer market direction only after tonight's U.S. inflation data release.
Nonetheless, Lien King Hon noted that if U.S. inflation does not fall significantly below expectations but remains in line, current U.S. bond yields already reflect such expectations. If bond yields remain stable following the inflation data, the impact on stock markets would be limited.
*Tencent's rising interest expenses may reduce buyback力度*
Tencent (00700) has completed issuing USD 1.8 billion in bonds and RMB 26 billion in dim sum bonds, with the latter setting a new market record in issuance size. The USD bond portion includes USD 1.3 billion in 10-year notes and USD 500 million in 20-year notes, with annual interest rates of 6.1% and 6.75% respectively—higher than the rates in its June issuance, which were 5.37% for the 10-year and 5.96% for the 20-year. Lien King Hon admitted that the higher interest rates on Tencent's USD bonds reflect rising U.S. bond yields and increased funding pressure on tech firms, as corporate bond yields must exceed U.S. 10-year Treasury yields to attract investors. Therefore, Tencent's future interest expenses will inevitably rise.
Given the rising interest costs, Lien King Hon expects Tencent's future earnings pressure to increase unavoidably, significantly compressing future profit margins. As the company warned after its second-quarter results, he anticipates that capital and interest expenses will very likely force Tencent to reduce its share buyback pace, though it may not need to suspend buybacks entirely, as its South African shareholder still holds a large stake, requiring Tencent to manage ongoing selling pressure.
Tencent is about to release its third-quarter results. Although its second-quarter performance outperformed peers, Lien King Hon believes the third quarter poses significant challenges. Besides needing to prove that profit growth can still offset rising capital and interest expenses, the high base effect from last year's third quarter will also affect year-on-year growth this time. Therefore, he remains cautious on Tencent for now, preferring to wait for the results to have clearer figures before making further moves. (hc)
*Lien King Hon: HSI stabilizes at 24,000 but meets resistance at 20-day MA*
Mainland China's September CPI rose 0.9% year-on-year, slightly below the expected 1%, but expanded 0.1 percentage point compared to August. Hong Kong stocks initially declined in the morning session but later rebounded, especially after the release of the inflation data. The HSI recovered from an intraday low of 24,115 to a high of 24,451, gaining over 300 points, and maintained gains before the midday break. In recent trading sessions, the HSI has not broken below previous lows and has held above 23,800. Lien King Hon, council member of the Hong Kong Securities Analysts Association, told The Economic Information Daily that the recent stabilization near 24,000 corresponds roughly to the 0.618 Fibonacci retracement level of the previous peak between late June and early August. Successfully defending this level shows some underlying support in the Hong Kong market. However, the rebound stalled near the 0.5 retracement level around 24,400 and the 20-day moving average near 24,500, suggesting that although the HSI has stopped falling, the rebound lacks strength. He expects clearer market direction only after tonight's U.S. inflation data release.
Nonetheless, Lien King Hon noted that if U.S. inflation does not fall significantly below expectations but remains in line, current U.S. bond yields already reflect such expectations. If bond yields remain stable following the inflation data, the impact on stock markets would be limited.
*Tencent's rising interest expenses may reduce buyback力度*
Tencent (00700) has completed issuing USD 1.8 billion in bonds and RMB 26 billion in dim sum bonds, with the latter setting a new market record in issuance size. The USD bond portion includes USD 1.3 billion in 10-year notes and USD 500 million in 20-year notes, with annual interest rates of 6.1% and 6.75% respectively—higher than the rates in its June issuance, which were 5.37% for the 10-year and 5.96% for the 20-year. Lien King Hon admitted that the higher interest rates on Tencent's USD bonds reflect rising U.S. bond yields and increased funding pressure on tech firms, as corporate bond yields must exceed U.S. 10-year Treasury yields to attract investors. Therefore, Tencent's future interest expenses will inevitably rise.
Given the rising interest costs, Lien King Hon expects Tencent's future earnings pressure to increase unavoidably, significantly compressing future profit margins. As the company warned after its second-quarter results, he anticipates that capital and interest expenses will very likely force Tencent to reduce its share buyback pace, though it may not need to suspend buybacks entirely, as its South African shareholder still holds a large stake, requiring Tencent to manage ongoing selling pressure.
Tencent is about to release its third-quarter results. Although its second-quarter performance outperformed peers, Lien King Hon believes the third quarter poses significant challenges. Besides needing to prove that profit growth can still offset rising capital and interest expenses, the high base effect from last year's third quarter will also affect year-on-year growth this time. Therefore, he remains cautious on Tencent for now, preferring to wait for the results to have clearer figures before making further moves. (hc)
