Ming Pao reporter Chen Weishen
The market is worried that the US Federal Reserve will continue to raise interest rates, further pushing down the bond market, and the 10-year US bond yield hit a high of 4% once more. The haze of interest rate hikes persisted, which continued to drive the strength of the US dollar, and investors became more cautious regarding Hong Kong stocks. The Hang Seng Index fell below the 17,000-point mark yesterday, fell 426 points at most, and reached a low of 16,789 points. It still fell 384 points to close at 16,832 points. The whole day’s main board turnover was only 91.21 billion yuan, a decrease of 3.9 billion yuan from Monday. The Hang Seng Technology Index fell 3.6%, hitting a record low of 3,278 points.
10-year U.S. bond yields hit a high of 4% once more
“North Water” went south to absorb at low prices, and the net inflow of funds was more than 395 million yuan on Monday, reaching 3.12 billion yuan. The KSE Index hit a new low, and the heavyweight Tencent (0700) might not even hold 260 yuan, reaching a low of 254.6 yuan. Among the blue chips, Country Garden and Longfor (0960) were the worst performers, down 9% and 8.5% respectively, and the two stocks have dropped by 17.9% and 15.5% in the past week (see Table 1). However, Innovation and Technology (0669) and Henderson Land (0012) bucked the market trend (see Table 2), rising 3.6% and 1.4% respectively. COSCO Holdings (1919) posted a positive profit, and together with its subsidiary Orient Overseas (0316), rose 1.7% and 0.5% respectively, making it a strange decline in the market.
Domestic property default worries persist, Country Garden Longhu tumbles by 10%
The haze of interest rate hikes is looming, and investors are worried regarding the rising risk of corporate defaults. Bloomberg reported that credit default swaps (CDS) in Asia rose at least two basis points yesterday, reflecting that the Markit Itraxx Japan ex-Japan investment-grade CDS Asia index, which includes the mainland market, hit a high of 194 basis points, the highest since March 2020. (See Figure 2). Asia’s CDS index has increased by 114 basis points year-to-date, which is more than 87 basis points and 52 basis points in Europe and the United States over the same period. The 5-year USD CDS of the Chinese government, which is an indicator of mainland defaults, has also continued to rise in the past year (see Figure 3), exceeding the level of US$107, a rise of nearly 1.7 times compared with the end of last year. Worries regarding defaults in mainland property stocks continued to heat up.
The main function of the so-called CDS is to allow bondholders or investors with heavy positions to hedge once morest the issuer’s debt default risk. If the CDS price and related indexes rise, it reflects investors’ expectation that the default risk of corporate or government debt will rise. Buying CDS is like buying alternative debt insurance, and an increase in CDS price is equivalent to an increase in premiums.
Brokerage: Danyou should take measures to preserve capital
Xie Mingguang, managing director of Yongyu Securities, said that even if there is good news for Hong Kong stocks, it will have a limited boost to the market. Under the continued ravages of Danyou, investors should take measures to preserve capital. Ye Shangzhi, chief strategist of First Shanghai, said that since September, the market turnover has been low, and it has not returned to the level of this year’s average daily turnover of 125.5 billion yuan. Yesterday, the main board turnover fell to regarding 91.2 billion yuan, reflecting investors’ desire to enter the market not tall.