Add Geely and CNOOC; Remove Great Wall Motor and JD.com
The share prices of our top picks dropped 8.0%, underperforming the HSI by 2% during the period under review. (8 Sep- 10 Oct)
During the period under review, the best performer was Budweiser APAC (1876 HK) while the worst performer was Longyuan (916 HK).
The US interest rate is expected to peak at 5% in 1Q23 and persist. Market should have priced in the negatives and mumble for a downcycle by then. We expect risk appetite to gradually improve in 2023. While the Globe is hiking rate to fight against inflation, we reckon that the low inflation in China put China in the safer zone. This allows more room for rate cut, not aggressively but to a certain extent. Our house view anticipates China’s 1Y LPR will likely drop by another 20bps by the end of this year. The PBoC will also inject further liquidity by cutting RRR by 50bps
We continue to favour sectors that benefit from supporting policies, like the renewable and auto sectors. We also recommend new economy stocks to play the likely rebound, given its attractive valuation and signs of easing regulatory developments. Finally, HK banks would enjoy tailwinds, as they are the clear beneficiaries of rising interest rate
We removed Great Wall Motor and added Geely into top picks, following the change in our auto sector top picks this month. Geely is also one of the Chinese OEMs with exports expected to benefit from RMB depreciation. We then removed JD.com to lower our new economy exposure. We added CNOOC to capture potential oil price rebound from recent low
