Daily Brief Macro: BUY/SELL/HOLD: Hong Kong Stock Updates (August 21) and more

• Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.
• J&T Global Express (1519 HK) received upgrades after reporting strong 2Q24 results.  Its SEA and China business showed growth in revenue and profitability.
• Galaxy Entertainment Group (27 HK) received an upgrade after revenue and EBITDA approached pre-COVID levels.  FIT Hon Teng (6088 HK) is seeing improvement in AI server, AirPod, and EV segments.

• Recent market disruptions, including a dramatic rally in the yen and a significant increase in the VIX, have raised concerns
• The convergence of US and Japan CPI rates may have contributed to the narrowing of Fed BoJ policy spread
• The VIX’s large move on August 5, 2019, has sparked concerns about the stability of the S&P options market and the potential impact on global risk levels

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• F&B / In Depth: A new Chinese food and beverage wave hits Southeast Asia Forget kung pao chicken and sweet and sour pork.
• There’s a new wave of food and beverage chains flowing out of China, and it’s all about Sichuan hot pot, braised chicken rice and pickle fish soup — as well as mainstays like bubble tea.
• Chinese food and beverage (F&B) companies have expanded quickly into Southeast Asia, and even into North America and Europe, in the past few years, driven in part by saturation at home.

• Broad increases in the flash services PMIs reinforced the signal that global activity remains resilient enough not to require forceful monetary easing.
• Residual seasonality hasn’t appeared in the PMIs again this summer, but it pollutes some unemployment data. A slight majority of countries have a higher UR than a year ago.
• Softening labour market trends from a relatively neutral cyclical position are consistent with gradual and limited rate cuts, even if they need reversing without a recession.

• For the week ending 16/Aug, US crude inventories dropped by 4.6 mb, exceeding the expected 2 mb drawdown. Gasoline and distillate stocks also declined, surpassing analyst expectations.
• US natural gas inventories rise 35 bcf for the week ending 16/Aug, exceeding analyst expectations of a 26 bcf buildup. Inventories are 12.6% above the 5-year seasonal average.
• UBS cut its target prices on Halliburton and Schlumberger but raised it for ExxonMobil and Occidental. Jefferies lowered its target price on Chevron.

• Hello and welcome back to our weekly positioning update.
• Markets are as tricky as always, as everyone is trying to grasp how Powell will address all the new information coming out of the labor market recently, with NFP constantly being revised down, California job gains revised down massively while jobless claims look less scary.
• Despite parts of the labor market looking slightly weak, the signs we are getting from the real estate market is looking strong in contrast, which could make the Jackson Hole symposium a bit more interesting as Fed are starting to focus (almost) solely on their Employment / Growth mandate.

• Though China’s authorities have taken action to help the construction sector, negative drags from the excess completed housing and uncompleted projects weigh on the construction, steel, and cement sector.
• Aggressive policy action is need to stabilize the housing market otherwise the effects will remain and could get larger.  
• China authorities for now however are focused on incremental policy support (i.e. drip by drip support).     

• After selling its coking coal business to Glencore Plc (GLEN LN), Teck Resources (TECK US) has pivoted to copper as its primary growth driver. 
• The 7.3 bn CAD cash (20% of Mkt cap) received from the sale of the coal business stake is being used for buybacks, debt repayment, and growth opportunities.  
• The stock is cheap on an EV-EBITDA basis at 7.5x, but we are not too fond of the business’s low ROCE. 

• The Bank of Korea maintained the Policy Rate at 3.5%, consistent with the consensus, due to the need for further confirmation of inflation trends and concerns over financial stability, particularly in the housing and foreign exchange markets.
• Global economic uncertainty, including fluctuations in US monetary policy expectations and geopolitical risks, will significantly influence the timing of future interest rate decisions.
• Domestically, the Bank of Korea is balancing moderate growth, driven by strong exports, with the risks posed by rising household debt and housing prices, suggesting a cautious approach to any potential rate cuts.

• Inflation for the first half of August stood at -0.03% bw, and on an annual basis, it decreased from 5.52% to 5.16%.
• Core inflation fell below 4.0% for the first time since February 2021.
• The revision to the CPI methodology shows a higher weight for services and a lower weight for energy products.