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KGI Commentary
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09:00 AM, Friday, Nov 27, 2020
Hang Seng Index Rose 150 Points on Thursday

The market continued to concern about the worsening of the epidemic and the slowdown of economic recovery, Hang Seng index continued to hover at current level, it opened 25 points higher and closed at 26,819 points, up 150 points, H-Share Index closed at 10,701 points, rose144 points. Market turnover was $113.6bn. Carrie Lam stated that the property market measures should remain intact at this moment, local properties under pressure, Wharf REIC(1997) and Hang Lung PPT(101) dropped around 2.9% and were the worst performing blue chips. HSBC(0005) dropped 0.8% on Thursday.

Europe Stock Market Declined on Thursday

US stock market closed on Thanksgiving holiday on Thursday. Chancellor Angela Merkel said on Wednesday Germany will extend restrictive measures imposed early this month to rein in a second wave of COVID 19 infections. Besides, latest data showed that French and German consumer confidence plunged in November, Europe stock market was sluggish on Thursday. Of which, UK FTSE 100 index fell 0.4% while German and France stock market fell slightly. On the other hand, although US crude inventory unexpectedly decline, WTI oil price still fell 1.7% to US$44.9 per barrel.

PBOC Emphasize Normal Monetary Policy; Hong Kong Stock Continue Range Trade

People Bank of China quarter report stated that it will maintain “normal” monetary policy as long as possible, which will not let market short of liquidity, but also not resort to flood-like stimulus. It might limit the upside of A share market in the short term. We expect Hong Kong stock market to continue range on Friday, Hang Seng Index resistance at 27,000. China monetary policy turned normal which might not be favorable to property stocks and other high debt companies. However, interest rate and bond yield stabilizes, would favor banking and insurance sector. In fact, Ping An (2318) and CPIC (2601) already rose sharply recently, investors could also eye at laggard such as China Life (2628) (in fact, its business performance is good in 2020).

Technical Analysis

Hang Seng Index rose 150 points on Thursday and closed with white candlestick, but the trading volume fell back to $113.64 billion. Technically, the HSI stayed above 10 days SMA(26,487), the VHSI also stayed below 20 level, and the RSI continued to remain above the overbought level of 70, but the MACD narrows in the positive region, together with the trading volume decreased, and the market momentum weakened. In addition, the recent IPO market also become the focus and may diversify the liquidity and limit the market performance. The first support level of the Hang Seng Index is the 10-days SMA, and the second support level is 26,000 points. In addition, the first resistance level is 27,000 points and the second resistance level is 27,500 points.

Recommended Stocks
Stock Recommendation
YONGDA AUTO
(03669)
Automobile industry was well supported by policy leading to continuous recovery. Luxury vehicles dealers Yongda Auto(3669)Q3 result also achieve strong rebound. The company recently increased holdings of two Porsches 4S stores. It is expected to strengthen its competitiveness in Porsche market and lift profitability. FY21 projected P/E is 10x. Meanwhile, that of Zhongsheng(881) and Meidong auto(1268) range from 18-32x. Target price is HK$14. Cut loss price is HK$11.6.


Source: KGI Research

Chan Lok Yee is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to: https://www.sfc.hk/publicregWeb/indi/BNJ943/details). She and/or her associate do not have any financial interest in the recommended issuer or new listing applicant.

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