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09:00 AM, Thursday, Oct 21, 2021
HSI Rose 348 points on Wednesday

Hang Seng index opened up 286 points higher on Wednesday and consolidated at high level. The index closed up 348 points to 26,136. H-shares index was up 1.5% to 9,277, and Hang Seng Tech index surged 2.7% to 6,691. Market turnover amounted at HK$156.5bn. Jack Ma is in a study tour in Europe, triggering rallies in Alibaba camp: AliHealth (0241) and Alibaba (9988) surged 13.5% and 6.7%. Other internet stocks followed, with Meituan (3690) and Tencent (0700) up 2.9% and 2.1%.

Dow Index hit new high on Wednesday

Anthem quarter result beat expectation, provide a boost to healthcare sector. Together with strength on utilities and real estate stocks, US stock market continued its strength on Wednesday. The Dow index once hit new high and closed 152 points higher at 35,609. Besides, S&P 500 index also rose 0.3%, and recorded six consecutive trading day gain. On the other hand, Netflix third quarter US subscriber growth slow down, share price fell more than 2%. Tech sector was weak, the Nasdaq index closed slightly lower. On the other hand, 10 Year US Treasury yield once rose to 1.67% on Wednesday, but finally closed flat at 1.65%. Besides, US dollar index fell 0.2% to 93.54, commodity price performed well. Gold price rose 0.8% to US$1,785 per ounce while oil price rose 1.2% to US$83.4 per barrel.

HSI near major resistance level at 26,560; Expect to oscillate at existing level today

Hong Kong stock continued its positive trend and overcome 26,000 on Wednesday. In fact, Vice Premier Liu He said that the risk from China Evergrande (3333) debt issue is controllable and reasonable capital demand from property firms was met, which will boost investor confidence. However, Hong Kong stock market has already accumulated significant gain, while Hang Seng Index is near major resistance level at 26,560 (recent high), Hang Seng Index is expected to oscillate at existing level today. Hong Kong Stock Connect recorded a net inflow of HK$3,916mn on Wednesday, of which, Meituan (3690) and Geely (0175) recorded net buy of HK$1,446mn and HK$617mn respectively. On the other hand, Anta(2020) suffered net outflow of HK$272mn. Pan Gongsheng, administrator of the State Administration of Foreign Exchange, said excessive tightening by financial institutions and markets on the property sector was being gradually corrected. Together with Vice Premier Liu He positive comment on China property sector, China property stocks such as China Overseas(0688), Country Garden(2007) and Sunac(1918) might rebound in the short term. Besides, China Mobile (0941) 3Q21 net profit rose more than 8%, in line with expectation. Given over 7% dividend yield, as well as anticipated A-share listing at the year end, we suggest to accumulate.

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Stock Recommendation
Chips supply shortage will continue impact on China auto sector in the fourth quarter. However, major enterprise auto sales improved on monthly basis in September, China MIIT also expected chips shortage impact on the auto sector will be slightly moderate in the fourth quarter as compared with third quarter. Guangzhou Auto (2238) sales also showed signs of improvement in September while its EV sales was outstanding. Suggest to accumulate during weakness. Target price: HK$8.50; Cut loss: HK$6.80.

Source: KGI Research

Chua Tit Hong is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to: He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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