Already mentioned the risk of inflation last month. Crude oil prices quickly broke through the US$80 per barrel mark at the end of the month, and the price of gasoline pushed to US$2.5 a gallon. However, the oil group was unwilling to expand the production scale, forcing many countries to take the initiative. It is the first joint action in history using the release of strategic oil reserves to slow down the rise in oil prices. The United States released 50 million barrels, India released 5 million barrels, and the United Kingdom released 1.5 million barrels. Even the Oil-consuming countries attempt to reduce the "impact" of the oil group (OPEC) on the global economy. 

US President Biden continues to nominate Fed Chairman Powell for another four years. In the past, Powell’s decision-making response was quick and his performance was quite satisfactory. Under the current environment, re-election is inevitable. However, even if the direction of monetary easing policy changes in the future, it is only an "old bottle of new wine", and it is difficult to have a new look. Inflation has become Powell’s primary challenge during his second term. In particular, the inflation rate in October was as high as 6.2%, which exceeded 5% for five consecutive months. This will make the United States “reducing the balance sheet” next year as a foregone conclusion and raising interest rates is also expected. Coupled with supply chain issues, it will inevitably affect the performance of the stock market in the long run. Investing in U.S. stocks will inevitably be more careful in the coming year. 

The same problem has also caused great troubles to the mainland economy. On the one hand, growth has slowed significantly. The GDP growth rate in the third quarter was only 4.9%, but producer prices continued to remain high, which put pressure on corporate profits and was close to stagflation. The situation, and due to the expected increase in returns, has forced the cost of financing to rise. The problems encountered by domestic real estate companies such as Evergrande (3333), Fantasia (1777), and Kaisa (1638) are due to their excessive leverage, rising financing costs, and the loss of profitability due to the cooling of the property market. As for regulatory issues and even "common prosperity", they are purely "symptoms" caused by increased economic downside risks. The mainland's leading technology and Internet stocks are naturally the most "notable" for their high earning power. The Beijing government plans to impose a data tax further suppressing corporate profitability, even Cathie Wood was also being scared, thinking that it is not a good time to invest in China for the time being. In the medium term, the valuation of the mainland stock market is far lower than that of the US stock market, and the Hong Kong stock market is more attractive. However, under the premise that short-term funds are flowing into virtual assets and US stocks, it is difficult for the Chinese and Hong Kong stock markets to perform well. The Hang Seng Index once again fell below the 25,000 points mark at the time of writing, and is in a wave of less than one wave. It still hopes that may successfully hold a low support of 23,681 points before the end of the year, which will bring short-term stimulus to reverse the disadvantages in the New Year and Winter Olympics atmosphere. 

Last month, the share price of Zijin Mining (2899) was promoted to follow the market downward at the beginning of the month, and then the market’s expectations of rising inflation have improved. It was reported at 10.82 yuan at the time of writing, roughly the same as the closing price at the end of last month. Although the stock price of the company outperformed the market trend, it cannot be regarded as an outstanding performance. Since the Hong Kong stock market is still short of capital inflows for the time being, investors can consider that it is more suitable to chase in stronger stocks.

The author recommends COSCO SHIPPING Ports (1199) this month. Due to the rapid increase in global freight rates in the second half of the year, the company’s nine-month net profit was US$262 million, an increase of 44.8% from last year, and its earnings per share reached 7.9 US cents. Due to the longer time required for customs clearance due to the epidemic, it is very beneficial to COSCO SHIPPING Ports. The fourth quarter has entered the peak shipping season. Therefore, even if the base figure in the fourth quarter of last year is slightly higher, the net profit growth for the whole year of this year will remain optimistic, and it is expected to still record double positions of percent increase. The market generally expects that the high freight rate will continue until the second quarter of the next year. After the company acquires Tianjin and Hamburg Container Terminals in Germany, the scale will be further expanded. In the next five years, the smart port strategy will include the use of 5G and the expansion of the use of the Navis N4 terminal system , Improve efficiency and reduce the cost of each TEU by 15-20% to further increase profitability. Considering that the net asset value per share is as high as $1.96, the current stock price is only 40% of the net asset value per share, and the price-to-earnings ratio is only 7.4 times. Since the company has indicated that it has sufficient cash to support the dividend policy in 2021, considering the current interest rate of 5.43%, it is expected the dividend for the whole year has remained roughly unchanged, and the overall valuation is quite reasonable. It is expected to break through the 52-week high of RMB 7.42 in the coming year.

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.