liveroulette| US bond yields affect capital flow Hong Kong stocks 'rise still needs to rely on earnings expectations to improve

Source Finance Union

April eleventhLiverouletteThe Hong Kong stock market failed to maintain its upward trend so far this week, and the Hang Seng Index fell 0%.Liveroulette.3% or 44 points, to close at 17095 points.LiverouletteThe Hang Seng Index fell 0.Liveroulette.4 per cent or 13:00 to close at 3538 points. Turnover in the big market was HK $98.8 billion, with a net inflow of HK $7.15 billion from Hong Kong stocks.

On the market, heavy machinery stocks showed a strong trend, with China Dragon Industry (3339 HK) up more than 8% and Zoomlion (1157 HK) up more than 4%. Seven departments, including the Ministry of Industry and Information Technology, issued the "implementation Plan for promoting equipment Renewal in the Industrial sector", proposing to speed up the replacement of equipment. By 2027, the scale of equipment investment in the industrial sector will increase by more than 25% compared with 2023. Pay attention to the industries where the production equipment such as industrial mother machinery, agricultural machinery, construction machinery and electric bicycles are at a low and medium level as a whole.

The trend of science and Internet stocks diverged, with Meituan-W (3690 HK) up 0.7%, Xiaomi Group-W (1810 HK) up 0.6%, NetEase-S (9999 HK) down more than 3%, and Baidu-SW (9888 HK) down more than 1%.

The US CPI exceeded expectations in March, confirming that the road to reducing inflation is not smooth, the expectations of market interest rate cuts have cooled sharply, the US economy has ushered in a relatively high economic growth rate and a higher inflation rate, and the higher nominal GDP growth has kept the US 10-year Treasury yield high, and the siphon effect on the capital flow of Hong Kong stocks is expected to be more lasting and obvious.

We believe that it is relatively certain that the Fed will start to cut interest rates this year, and what is uncertain is the timing and pace of the rate cuts. But fighting inflationary twists and turns means fewer interest rate cuts and a longer period of high risk-free interest rates, which will continue to dampen the room for valuation repair for Hong Kong stocks. As a result, the follow-up rally of Hong Kong stocks still depends on the expected improvement in earnings brought about by the strengthening of China's endogenous economic momentum.

China's CPI in March was + 0.1 per cent year on year (expected to be + 0.4 per cent). Affected by factors such as the seasonal decline in post-holiday consumer demand and the overall adequacy of market supply, the year-on-year increase in CPI slowed down in March. In March, PPI was-2.8% year-on-year (expected-2.7%), the price of production materials was-3.5% year-on-year, the largest decline since July 2023; the price of living data was-1.0% year-on-year, with 11 consecutive months of negative growth, and manufacturers are still cutting prices to sell inventory. The PPI of consumer durables in the means of subsistence was-1.8% year on year, narrowing the decline for two consecutive months, while the month-on-month growth rate of consumer durables was 0%, which has stopped falling for two consecutive months, which is a good sign.

On the whole, March CPI shows that the recovery of downstream domestic demand is still weak, the marginal pressure of price reduction by upstream manufacturers is relaxed, but the ability to raise prices is still insufficient. Combined with the fact that PMI returned to the expansion range in March but PPI continued to decline, corporate profits will remain under pressure, which in turn suppresses job supply and household income. CPI is expected to remain relatively low for some time.

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