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1. S&P 500 rises on Friday to close at 2023 high: Live updates

2. US Fed chair Jerome Powell calls rate cut speculation ‘premature’

3. US construction spending rises in October

4. Wall St Week Ahead Tax-loss selling, ‘Santa rally’ could sway U.S. stocks after November melt-up

5. US dollar falls on dovish remarks by Fed’s Powell

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1. China consumption shows ‘no sign’ of a strong V-shaped recovery, McKinsey says

2. Asia factory activity weakens, uncertainty on China clouds outlook

3. China new home prices inch up for third month in November – survey

4. Alibaba’s value dips below upstart PDD’s in watershed moment for China e-commerce sector

5. China Evergrande creditors seek controlling stakes in new proposal

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Sembcorp Industries Ltd (SCI SP): Relook at green investment

• BUY Entry 5.20 – Target – 5.70 Stop Loss – 4.95
• Sembcorp Industries Ltd provides utilities and integrated services for industrial sites such as power, gas, steam, water, wastewater treatment and other on-site services. Sembcorp Industries serves industrial parks, business, commercial, and residential spaces.
• Amass war chest to fight climate change during COP 28. The 23 UN Climate Change Conference is held in Dubai from 30 November to 12 December. On day one, countries reach an agreement to set up a loss and damage fund to help vulnerable communities struggling to cope with loss and damage caused by climate change. The total initial pledge amounts to US$400mn. Meanwhile, the US is reported to pledge US$3bn to the Green Climate Fund which aims to help developing countries invest in clean energy. The implication is that emerging countries accelerate renewable energy infrastructure expansion in the next couple of years with external funding aids.
• Investing in renewables. Sembcorp Industries announced plans to invest about S$10.5bn in renewables as part of its 2023-2028 strategic plan. This substantial investment will account for 75% of the company’s total investments from 2024 to 2028. Sembcorp aims to grow its installed renewable capacity to 25 gigawatts (GW) by 2028, building upon its current 12 GW capacity, which represents 61% of its energy portfolio. The company also targets a 50% reduction in emission intensity and intends to focus on hydrogen assets, decarbonisation solutions, and integrated urban solutions for the remaining investment allocation. Sembcorp will continue to use gas as a transitional fuel to support its renewable growth and invest in low-carbon energy and hydrogen technologies. Its comprehensive 5-year plan will help to achieve its goal of halving its emission intensity by 2028.
• Positive sentiment. The COP28 is expected to redirect investors’ sentiment to focus on the green energy theme in the near term. Institutions are rebalancing and reconstituting portfolios in December. Global utilities sector and clean energy themed underperformed in 2023. This sector and theme will rebound in 2024 as declining inflation relieves cost pressures.
• 3Q23 results review. Revenue fell 29% YoY to S$71.3mn. Gross material margin 21.6% from 43.8%. The new plant in Penang is expected to contribute at least US$30mn for FY24. The company maintains an interim dividend of 1.2 SG cents.
• Market consensus.

(Source: Bloomberg)

Tianjin Pharmaceutical Da Re Tang Group Corp Ltd (TIAN SP): Respiratory illness strikes Northern China

• RE-ITERATE BUY Entry 2.04 – Target – 2.20 Stop Loss – 1.96
• Tianjin Pharmaceutical Da Ren Tang Group Corporation Limited produces and sells traditional Chinese medicine, western medicine, health products, and healthcare instruments. The Company also manufactures gene-related biopharmaceutical products. Tianjin Pharmaceutical Da Ren Tang Group markets its products under the Great Wall, Cypress, and Health brand names.
• Respiratory symptoms spreading. China’s National Health Commission (NHC) responded to concerns about respiratory illness outbreaks, citing a surge in acute respiratory infections attributed to a combination of known pathogens, including influenza, rhinovirus, mycoplasma pneumoniae, and respiratory syncytial virus. Despite videos and social media showing crowded hospitals, the NHC assured the World Health Organisation (WHO) that no unusual or novel pathogens were detected, linking the rise to the easing of COVID-19 restrictions and the circulation of known pathogens. Influenza, respiratory syncytial virus, and adenovirus have been circulating since October. While China sees the surge as seasonal and linked to immunity debt, the WHO advises precautionary measures and stays in contact with Chinese authorities. The heightened concern may lead Chinese residents to stock up on medication and health supplements, benefiting companies like Tianjin Pharmaceutical, a producer of such health products.
• Resistance to antibiotics. Despite mycoplasma pneumonia showing resistance to a broad spectrum of antibiotics, it can be treated with other drugs like azithromycin, erythromycin, and clarithromycin. The State Council taskforce has ordered local governments to enhance preparedness for outbreaks of flu, COVID, and other infectious diseases, which may heighten the need for healthcare equipment and medications.
• 3Q23 business updates. Total revenue declined by 5% YoY to RMB$1,705mn. 9M23 revenue increased by 4% YoY to RMB$5,793mn. Issued cash dividend on 6 June 2023 amounting to RMB1.12 per ordinary share.
• Market Consensus.

(Source: Bloomberg)

China Traditional Chinese Medicine Holdings Co. Limited (570 HK): Protection for winter flu

• BUY Entry – 3.90 Target – 4.25 Stop Loss – 3.75
• China Traditional Chinese Medicine Holdings Co. Limited is principally engaged in the manufacture and sales of traditional Chinese medicine (TCM). The Company operates through 12 subsidiaries, including Sinopharm Group Dezhong (Foshan) Pharmaceutical Co., Ltd., Sinopharm Group Feng Liao Xing (Foshan) Pharmaceutical Co., Ltd., Sinopharm Group Guangdong Medi-World Pharmaceutical Co., Ltd., Sinopharm Group Luya (Shandong) Pharmaceutical Co., Ltd., Sinopharm Group Feng Liao Xing (Foshan) Medicinal Material & Slices Co., Ltd., Foshan Winteam Pharmaceutical Sales Company Limited, Sinopharm Group Tongjitang (Guizhou) Pharmaceutical Co., Ltd., Sinopharm Group Jingfang (Anhui) Pharmaceutical Co., Ltd., Sinopharm Group Longlife (Guizhou) Pharmaceutical Co., Ltd., Qinghai Pulante Pharmaceutical Co., Ltd., Guizhou Zhongtai Biological Technology Company Limited and its subsidiaries and Jiangyin Tianjiang Pharmaceutical Co., Ltd. and its subsidiaries.
• China experiencing a respiratory illness outbreak. Seasonally, respiratory illness cases increase during winter season, especially in the norther part of China. However, a recent surge in flu and pneumonia cases in China raised concerns about whether COVID spread resumed. No new virus has been detected so far, and experts believe that the three-year lockdown policy protected most Chinese residents from COVID virus, and hence, a lack of antibodies contributes to people’s weakened immunity against COVID-like flu and pneumonia.
• Traditional Chinese medicines in demand. Thought traditional Chinese medicine is not the specialised drugs to treat flu or pneumonia, it is considered a supplementary treatment. Families are stocking up on traditional Chinese medicines and pills in case members have similar symptoms. The authorities have recently released the 2023 Winter Influenza Chinese Medicine Prevention and Treatment Plan for Beijing. Consequently, the demand for these medicines is likely to increase throughout the winter and early spring seasons.
• 1H23 results update. Revenue jumped by 57.4% YoY to RMB9.3bn. GPM was 51.1%, up 0.7ppts YoY. Net profit jumped by 40.0% YoY to RMB557.2mn. NPM was 6.2%, up 0.3 ppts.
• Market consensus.

(Source: Bloomberg)

Trip.com Group Ltd. (9961 HK): Favourable seasonality

• RE-ITERATE BUY Entry – 273 Target – 295 Stop Loss – 262
• Trip.com Group Ltd is a China-based company mainly engaged in the operation of one-stop travel platform. The Company’s platform integrates a comprehensive suite of travel products and services and differentiated travel content. Its platform aggregates its product and service offerings, reviews and other content shared by its users based on their real travel experiences, and original content from its ecosystem partners to enable leisure and business travellers to have access to travel experiences and make informed and cost-effective bookings. Users come to its platform for any type of trip, from in-destination activities, weekend getaways, and short-haul trips, to cross-border vacations and business trips.
• Upcoming winter travel season. The upcoming winter and festive seasons are expected to provide a boost to travel demand. The winter holidays spanning early November through January are usually one of the busiest travelling periods. Consumers are likely to be clearing their work leaves, or finding time to escape the heat or cold in their countries. The upcoming winter holidays also mark the first winter season since China’s re-opening at the start of 2023. Trip.com would be able to ride on the rising demand for travelling over this peak period. Furthermore, a more relaxed visa-free transit policy is bound to encourage travel agencies from home and abroad to help more foreign visitors come to China. China’s 72-hour and 144-hour visa-free transit policies have been extended to visitors from 54 countries, with Norway being the latest addition.
• An increasing amount of flights showcasing strong travel demand. Several airlines globally have already announced plans to increase the number of flights globally across the incoming winter travel season. Chinese airlines have also seen a rise in scheduled flights for winter-spring, scheduling 96,651 domestic cargo and passenger flights each week for the upcoming winter-spring season, an increase of 33.95% from the same period in 2019-2020, according to the Civil Aviation Administration of China (CAAC). 516 new domestic routes will also be opened from Oct 29 to March 30 next year, providing 7,202 flights each week, according to the CAAC. In terms of international flights, 150 domestic and foreign airlines plan to arrange 16,680 flights per week, reaching 68 foreign countries. The US Department of Transportation announced that flights between China and the US will increase to 70 a week starting on 9 November, from the current 48 a week. The average flights between the two counties averaged 340 a week in the pre-COVID period.
• Promoting inbound tourism to China. Trip.com has signed a three-year agreement with the China International Culture Association (CICA) to boost inbound tourism through the Nihao! China campaign, which focuses on cultural exchange and fostering connections between China and international visitors. This year’s Hello! China event drew 892 representatives from 70 countries and regions around the world. To support China’s inbound tourism goals, the group will provide carefully chosen content highlighting specific products and services and will work with Chinese cultural centers, tourist boards, and other organizations.
• 3Q23 results. Net Revenue improved to RMB 13.7bn, up 99% YoY, compared to RMB 6.9bn in 3Q22. Net profit rose to RMB 4.6bn in 3Q23, compared to RMB 245mn in 3Q22. Diluted EPS was RMB 6.84 in 3Q23, compared to RMB0.41 in 3Q22.
• Market Consensus.

(Source: Bloomberg)

Barrick Gold Corp (GOLD US): A rate-cut bet

• BUY Entry – 17.6 Target – 19.4 Stop Loss – 16.7
• Barrick Gold Corporation is an international gold company with operating mines and development projects in the United States, Canada, South America, Australia, and Africa.
• Inflation easing. The anticipated conclusion of the current interest rate hike cycle is slated for the upcoming year. The Federal Reserve’s trajectory for US interest rate adjustments remains anchored in the pivotal long-term 2% inflation target, as underscored by recent addresses from various branch chairmen. Notably, recent inflation data suggests a notable easing of inflationary pressures in the United States. In October, the personal consumption expenditures (PCE) price index, rose 0.2%, in line with expectations, showing a 3.5% increase YoY. Personal income and spending both rose 0.2%, meeting estimates and suggesting consumers are keeping pace with inflation. Despite headline inflation remaining flat at 3% for the month, energy price decreases offset food price increases. Goods prices fell 0.3%, while services rose 0.2%, with notable gains in international travel, health care, and food services. Continuing unemployment claims surged to 1.93mn, the highest since 27 November 2021. This has prompted the market to accelerate its timeline for anticipating a Federal Reserve interest rate reduction, now anticipated in the second quarter of the coming year. Concurrently, both the 10-year and 30-year US bond interest rates, along with the US dollar index, have experienced recent declines. Conversely, the price of gold has rebounded, surging to levels reminiscent of May this year and surpassing the significant $2,000/oz threshold once more.

Gold Price vs Dollar Index

(Source: Bloomberg)

• Geopolitical unease remains elevated. Despite recent alleviation in tensions between China and the United States, the overall outlook remains cautious. As we approach 2024, anticipated geopolitical uncertainties loom, notably with the Taiwan election in January and the US election in November. The prevailing risk aversion continues to underpin elevated gold prices.
• 3Q23 results. Revenue rose 13% YoY, to US$2.86bn. Non-GAAP EPS beat estimates by US$0.04 at US$0.24. Expect stronger 4Q23 results, but FY23 gold production to be slightly below previous guidance range of US$4.2mn/oz to US$4.6mn/oz.
• Market consensus.

(Source: Bloomberg)

Conocophillips (COP US): OPEC+ production cut expectations

• RE-ITERATE BUY Entry – 114 Target – 126 Stop Loss – 108
• ConocoPhillips explores for, produces, transports, and markets crude oil, natural gas, natural gas liquids, liquefied natural gas, and bitumen on a worldwide basis.
• OPEC+ meeting. OPEC+ is in discussions regarding a potential additional oil supply cut for the first quarter of 2024 to bolster the market, with the exact details yet to be finalised. The group, responsible for over 40% of global oil supply, is already implementing cuts of about 5mn barrels per day (bpd). Sources suggest the proposed cut could be as much as 1mn bpd, though uncertainties remain, and the meeting may retain the existing policy. The talks, initially delayed due to a dispute over output quotas for African producers, will proceed on Thursday. Brent crude oil is currently around $83 per barrel. With the possible output cut, oil prices will once again rise due to the reduction of supply in the market.

Brent price chart

(Source: Bloomberg)

• US oil production rose. US crude oil, gasoline, and distillate inventories increased as refiners raised output despite subdued fuel demand, according to the Energy Information Administration (EIA). Crude inventories rose by 1.6mn barrels, with East Coast stockpiles reaching their highest since January 2021. Refinery crude runs increased, and refinery utilisation rates rose to 89.8% of total capacity. The return of refinery capacity after maintenance, coupled with weak demand during the Thanksgiving holiday, contributed to the supply situation. Despite the inventory builds, Brent and West Texas Intermediate crude futures gained, showing that the increase in crude inventory did not affect the prices much and the focus remains on the OPEC+ meeting outcome.
• 3Q23 results. Production rose 3% YoY, to 1.81mn boe/day. Non-GAAP EPS beat estimates by US$0.07 at US$2.16. Expect Q4 revenue of US$8.69bn vs US$8.54bn consensus. Net income fell from US$4.5bn in 3Q22 to US$2.8bn in 3Q23. Forecast its 4Q23 production to be between 1.86mn to 1.9mn boe/day and raised its Fy23 forecast to be about 1.82mn boe/day. FY23 adjusted operating costs was also raised to US$8.6bn from the prior US$8.3bn.
• Market consensus.

(Source: Bloomberg)

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Trading Dashboard Update: Cut loss on Great Wall Motor (2333 HK) at HK$10.9 and Super Micro Computer (SMCI US) at US$267.0

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