In September, the US consumer price index rose by 5.4% year-on-year, as the highest increase in 30 years, especially the price of natural gas rose by 42.1%. US Federal Reserve Chairman Powell has predicted that the upward trend in US inflation data will be longer than expected and will continue into next year. In addition, the IMF in multiple countries expects that the inflation rate in the developed countries will rise to 2.8% in 2021, and the consumer price inflation in emerging and developing countries will reach 5.5%. Therefore, it reminds central banks to prepare to "close water" and amend the past easing policies. Powell stated that he moves towards reducing asset purchases. At the Fed meeting in early November, the size of bond purchases is expected to be reduced by US$120 billion to suppress inflation. The market expects that the Fed will complete the reduction of debt purchase plans in mid-2022 as planned. Although the chance of raising interest rates is low, the negative impact on bonds will be devastating. The 10-year U.S. Treasury bond yield rose above 1.7%, up to 45.7% from the low of 1.128% at the beginning of this year. Expecting it will go further and gradually affect the cost of American companies.

At present, to hedge against inflation risks, we mainly rely on several tools: commodities, antiques, art, stocks, inflation-protected bonds (TIPS), real estate or virtual assets, and so on. The anti-inflation effects of various investment tools are different, but in terms of flexibility and low correlation, gold is the priority, especially compared to relatively conservative small investors, gold is the best hedging tool. The author never questioned the importance of virtual assets in the market, but the technical skill needed in the analysis, trading and preservation, plus the number of virtual currencies with higher liquidity is limited, ordinary investors better not put too much bet on it. 

Back to Hong Kong stocks, after experiencing a sharp decline in September, the trend of the Hang Seng Index rebounded in October. The epidemic situation in Hong Kong has gradually stabilized, HSBC Holdings (0005) has achieved satisfactory results in the first three quarters, and Jack Ma’s outbound news is positive for technology and Internet stocks. Hong Kong stocks regained certain confidence. Unfortunately, at the time of writing, it was still constrained by the high of 26,560 in the Hang Seng Index in September. Recently, it has turned into a competition pattern, negotiating around 26,000 points. The risk of a sharp drop has decreased, it should be a good time to buy. However, as this is also approaching year-end and it is time to put on some makeup. Return on buying in the fourth quarter was higher, so you can make a small fortune to spend the Thanksgiving and Christmas. 

In terms of industry, the author continues to recommend choosing upstream resource stocks, but the market rebound can pay attention to the hot ones, such as new energy vehicles and technology network stocks. On the other hand, the weather in the Mainland has turned cold earlier this year, power rationing has increased the demand for power plants and new energy sectors, and resource stocks have also been quite positive. However, coal stocks will be more unfavourable if it is transferred into the winter. Because of its higher degree of environmental pollution, it is better to sell it, and it is more appropriate to switch to gas stocks. 

This month, the author recommends the traditional gold mining stock Zijin Mining (2899). The company's net profit for the first nine months of this year is RMB 11.3 billion, and the net profit per share is approximately RMB 0.445. Compared with the first two quarters, the net profit growth in the third quarter accelerated, mainly due to the continuous high metal prices pushing up income. The net profit in the third quarter reached 4.65 billion yuan in a single quarter. During the same period, the company’s gold and copper production costs were only RMB 178.02/g and RMB 18,030/ton. In particular, copper production was relatively low compared to other major peers. Its iron ore concentrate gross profit rate reached an astonishing 76.4%, is mainly due to its past economies of scale and the early acquisition of a large number of resource reserves. Of course, the inflation mentioned in the previous article is one of the main reasons to recommend. Another medium-term upward drive is that the company has finally stepped into the lithium battery field and acquired the Argentine lithium salt lake project for 4.939 billion yuan, together with the Serbian copper and gold mine. Serbia Copper and Congo’s Kamoa-Kakura Phase I expansion project, the next year’s output growth is still quite satisfactory. Under the medium-term upward trend of metal prices, the next year’s net profit growth will be quite impressive. To buy, you can first look up to 12.80 yuan position. 

GEG (0027), which was introduced last month, is roughly the same as the market. Unfortunately, due to the national inspections affecting the number of tourists during the Golden Week of November, there are not very good data, but the worst time has passed, and it will only improve in the future. There are still a lot of good investment targets in the market, but if readers can still hold mid-line if they are confident in the shares. Anyway, the current price is still above 40 yuan, which is still slightly higher than the buying price suggested, such If Hong Kong and Macau resume customs clearance before Christmas, there will be additional encouragement.

Kay Ho (CE No.: ANV293)

Acer King Capital Hong Kong Limited

Statement: The author is a licensee of the 1st, 4th, and 9th types of licenses of Securities and Futures Commission, SFC. Acer King securities Limited and Acer King Capital Hong Kong Limited are affiliated companies of Hantec Group and were invited to contribute articles in Hantec Group's monthly newsletter. The writing does not represent the position of Hantec Group. As the author does not personally hold the above-mentioned shares, investors should exercise caution when buying or selling relevant securities and investment instruments.