{Economic Information Daily, 15th} Surprisingly high inflation data fueled rate hike expectations, causing AI-related US stocks to plunge sharply on Wednesday (14th). The bond price of CoreWeave, a major AI computing power leasing giant, rapidly dropped to less than 80% of its face value. Musk described the situation as "scary" on a social media platform, immediately triggering market panic over AI financing. Global stock markets fluctuated, with Japanese stocks falling over half a percent and South Korean stocks plunging 8%. The Hong Kong market was not spared. The Hang Seng Index opened with a gap down of 200 points, broke below the 24,000 level before midday close, and ended at 23,955, down 358 points or 1.5%. The Hang Seng China Enterprises Index closed at 8,059, down 123 points or 1.5%. The Hang Seng Tech Index ended at 4,051, down 122 points or 2.9%. Panic sentiment pushed the half-day turnover on the main board close to HK$113.8 billion. Northbound funds did not take advantage of the dip, with net outflows exceeding HK$500 million during the morning session.
*Nie Zhenbang: Rate hike expectations fluctuate; Hang Seng Index likely to trade sideways in the short term*
The year-on-year increase in the US September Consumer Price Index (CPI) rose to 3.7%, up from 3.4% in August, slightly higher than the market expectation of 3.6%. The probability of a rate hike this month has increased to 50%. Nie Zhenbang, Chief Analyst at High Growth Securities Finance, told the Economic Information Daily that rate hike expectations have always been volatile and cannot be determined by just one or two data points. He expects further changes before the Fed's interest rate decision at the end of the month. Recently, New York Fed President Williams hinted at no rate hike this month. As the third-highest official in the Fed, his comments carry weight. Therefore, the likelihood of a rate hike this month is small.
Nie Zhenbang said that overnight declines in US semiconductor stocks hit other Asian markets hardest. Semiconductor stocks continued their previous downward trend. Although semiconductor-related stocks have limited weight in the Hong Kong market, they were affected by rising rate hike expectations. Coupled with the negative sentiment from overseas markets, tech stocks fell significantly, dragging the Hang Seng Index lower. However, he pointed out that unless the mainland economy deteriorates further, the current level should provide some support for the Hang Seng Index.
Nie Zhenbang noted that although US bond yields remain high, the chance of a further breakout upward is limited, so financial stocks, which are heavily weighted in the Hong Kong market, are expected to stabilize. Domestically, yesterday's data showed that the year-on-year rise in September CPI was the largest in three months. Combined with strong growth in imports and exports, the fourth-quarter economy is expected to remain optimistic, supporting stabilization in tech and consumer stocks. Moreover, given that the share prices of major tech stocks are currently very low, the Hang Seng Index is unlikely to break below last week's low of 23,737. He expects the index to continue trading within the range of 23,800 to 24,600.
*Lenovo's price-to-sales ratio remains low; short-term trading risky but medium to long-term outlook still attractive*
Barclays downgraded Dell Technologies, Hewlett Packard Enterprise, and NetApp, citing slower corporate adoption of artificial intelligence (AI). Overnight, data center-related stocks plunged sharply, with Hewlett Packard Enterprise (HPE) down 8.3%, Oracle down 8.8%, and Dell Technologies plunging 11.3%. Next-generation cloud service stocks crashed on Wednesday, with CoreWeave's share price briefly plunging 17.2%, dragging its bond price down rapidly to levels typically seen only when companies face financial distress.
Barclays analysts pointed out that AI-related stocks had previously accumulated significant gains, but OpenAI's revenue data raised concerns, potentially dampening demand for AI infrastructure. Additionally, rising interest rates may pressure AI equipment stocks that rely heavily on debt. Nie Zhenbang said that although Lenovo's (00992) share price has risen significantly this year, its current price-to-sales ratio (PS) is only about 0.5 times. US peers like Dell have a PS ratio above 2 times, while US computer-related stocks generally have PS ratios as high as 4 times, making Lenovo relatively undervalued.
Nie Zhenbang believes the market is concerned about continuously rising memory chip prices and whether Lenovo can pass on the increased costs to consumers. If successful, Lenovo's fundamentals next year would remain positive; if not, its profit margins could be squeezed. Although there were earlier rumors that Apple reduced its orders by up to 20%, possibly due to price increases, Nie Zhenbang said computer products and mobile phones cannot be compared directly. The mobile phone market is more competitive, whereas in the PC market, especially for AI-focused PCs like Lenovo's, there are fewer competitors. Additionally, as the industry enters the AI era, PCs are undergoing a replacement cycle from traditional to AI-powered devices. Moreover, while mobile phones are consumer goods and consumers may be more price-sensitive, computers are productivity tools that enhance efficiency and thus have greater investment value.
Hong Kong's AI equipment stocks fell across the board today. Blue-chip Lenovo plunged as much as 14%; non-blue-chip stocks such as GDS Holdings (09698) dropped 16%; Montage Technology (06809) and Biren Technology (06082) both fell 11%. Despite his positive outlook on Lenovo's development prospects, Nie Zhenbang believes that given the ongoing correction in AI-related stocks and poor external sentiment—such as South Korea's SK Hynix plunging 10% today—short-term trading carries risks. In the medium to long term, it would be more attractive to buy Lenovo when its share price pulls back to the August lows (approximately HK$23 to HK$24). As for GDS Holdings, Nie Zhenbang believes the company turned profitable in the second quarter, and its prospects were originally promising. However, signs of a potential slowdown in AI development are putting pressure on its share price, making it unsuitable for investment in the short term. (vs)
*Nie Zhenbang: Rate hike expectations fluctuate; Hang Seng Index likely to trade sideways in the short term*
The year-on-year increase in the US September Consumer Price Index (CPI) rose to 3.7%, up from 3.4% in August, slightly higher than the market expectation of 3.6%. The probability of a rate hike this month has increased to 50%. Nie Zhenbang, Chief Analyst at High Growth Securities Finance, told the Economic Information Daily that rate hike expectations have always been volatile and cannot be determined by just one or two data points. He expects further changes before the Fed's interest rate decision at the end of the month. Recently, New York Fed President Williams hinted at no rate hike this month. As the third-highest official in the Fed, his comments carry weight. Therefore, the likelihood of a rate hike this month is small.
Nie Zhenbang said that overnight declines in US semiconductor stocks hit other Asian markets hardest. Semiconductor stocks continued their previous downward trend. Although semiconductor-related stocks have limited weight in the Hong Kong market, they were affected by rising rate hike expectations. Coupled with the negative sentiment from overseas markets, tech stocks fell significantly, dragging the Hang Seng Index lower. However, he pointed out that unless the mainland economy deteriorates further, the current level should provide some support for the Hang Seng Index.
Nie Zhenbang noted that although US bond yields remain high, the chance of a further breakout upward is limited, so financial stocks, which are heavily weighted in the Hong Kong market, are expected to stabilize. Domestically, yesterday's data showed that the year-on-year rise in September CPI was the largest in three months. Combined with strong growth in imports and exports, the fourth-quarter economy is expected to remain optimistic, supporting stabilization in tech and consumer stocks. Moreover, given that the share prices of major tech stocks are currently very low, the Hang Seng Index is unlikely to break below last week's low of 23,737. He expects the index to continue trading within the range of 23,800 to 24,600.
*Lenovo's price-to-sales ratio remains low; short-term trading risky but medium to long-term outlook still attractive*
Barclays downgraded Dell Technologies, Hewlett Packard Enterprise, and NetApp, citing slower corporate adoption of artificial intelligence (AI). Overnight, data center-related stocks plunged sharply, with Hewlett Packard Enterprise (HPE) down 8.3%, Oracle down 8.8%, and Dell Technologies plunging 11.3%. Next-generation cloud service stocks crashed on Wednesday, with CoreWeave's share price briefly plunging 17.2%, dragging its bond price down rapidly to levels typically seen only when companies face financial distress.
Barclays analysts pointed out that AI-related stocks had previously accumulated significant gains, but OpenAI's revenue data raised concerns, potentially dampening demand for AI infrastructure. Additionally, rising interest rates may pressure AI equipment stocks that rely heavily on debt. Nie Zhenbang said that although Lenovo's (00992) share price has risen significantly this year, its current price-to-sales ratio (PS) is only about 0.5 times. US peers like Dell have a PS ratio above 2 times, while US computer-related stocks generally have PS ratios as high as 4 times, making Lenovo relatively undervalued.
Nie Zhenbang believes the market is concerned about continuously rising memory chip prices and whether Lenovo can pass on the increased costs to consumers. If successful, Lenovo's fundamentals next year would remain positive; if not, its profit margins could be squeezed. Although there were earlier rumors that Apple reduced its orders by up to 20%, possibly due to price increases, Nie Zhenbang said computer products and mobile phones cannot be compared directly. The mobile phone market is more competitive, whereas in the PC market, especially for AI-focused PCs like Lenovo's, there are fewer competitors. Additionally, as the industry enters the AI era, PCs are undergoing a replacement cycle from traditional to AI-powered devices. Moreover, while mobile phones are consumer goods and consumers may be more price-sensitive, computers are productivity tools that enhance efficiency and thus have greater investment value.
Hong Kong's AI equipment stocks fell across the board today. Blue-chip Lenovo plunged as much as 14%; non-blue-chip stocks such as GDS Holdings (09698) dropped 16%; Montage Technology (06809) and Biren Technology (06082) both fell 11%. Despite his positive outlook on Lenovo's development prospects, Nie Zhenbang believes that given the ongoing correction in AI-related stocks and poor external sentiment—such as South Korea's SK Hynix plunging 10% today—short-term trading carries risks. In the medium to long term, it would be more attractive to buy Lenovo when its share price pulls back to the August lows (approximately HK$23 to HK$24). As for GDS Holdings, Nie Zhenbang believes the company turned profitable in the second quarter, and its prospects were originally promising. However, signs of a potential slowdown in AI development are putting pressure on its share price, making it unsuitable for investment in the short term. (vs)
