The most shocking scene of the "20th National Congress" that ended last month was the fact that former President Hu Jintao was "invited to leave" at the meeting. It is difficult for the me to understand the inside story without being an insider, but there are only two things that are very unusual. Firstly, after Hu Jintao's attempt to open the red folder on the table was stopped by Li Zhanshu, the chairman of the People's Congress sitting next to him. It was obvious that the two sides were pulling. Secondly, Hu Jintao wanted to talk to President Xi Jinping after standing up, but President Xi did not stand up or even look back. The obvious "physical discomfort" theory is inevitably convincing in addition to the failure of the Politburo of the Central Committee. It is enough to prove that President Xi has finally taken full control of power after two terms. It's just that there are still big unknowns in the future whether there will be counterattacks by other forces. The stock markets in China and Hong Kong fell sharply in response to the exit event, with the Shanghai Composite Index falling below the 3,000-point mark. The wealth of mainland wealthy companies listed in the United States has lost more than 9 billion US dollars in one day, and the US dollar against the renminbi once peaked at 7.3093. Afterwards, it lacks confidence in the future and motivation to enter the market although the market situation has stabilized. In addition, it is expected that the market conditions will continue to be mostly pessimistic next month for World Cup month. Although I do not encourage speculation, you may consider technology stocks with better quality or new energy vehicle manufacturers if you want to "strike a rebound".

On the other hand, the British politics, which is closely related to Hong Kong people, has also been turbulent. The Prime Minister, Liz Truss, who "shakes hands" for the last time before the Queen's death, became the Prime Minister with the shortest term due to the tax cut issue. The former Chancellor of the Exchequer, Rishi Sunak has been confirmed to take over as the leader of the Conservative Party when the time of writing, becoming the youngest and the first non-white prime minister in more than 200 years. With a combined asset of 730 million pounds with his wife, he is even richer than the king and his wife. When facing the situation of the energy crisis and inflation, "too rich" has become a disadvantage. The split of the Conservative Party and the emergence of a ruling crisis seems more inevitable, and there is even a chance of an early election in the future. GBP/USD hit a low of 1.0384 at the end of last month before rebounding to 1.1563 at the time of writing. Only the interest rate gap between the US and the Bank of England will continue to widen, and it will be extremely difficult to turn around and recover. Some traders bet on the Bank of England's November meeting to raise interest rates by 200 basis points, but the possibility is not 0 if the central bank has announced in advance that it will take "major policy action". The interest rate difference between the two places has always put a lot of pressure on the pounds. The short-term resistance is at 1.23, and it still remains bearish on the midline. 

Different from the global stock market, the US stock market recorded a strong rebound in October, and the performance of the large US stock market companies was better than expected. Coupled with the Federal Reserve's indication that the rate of interest rate hikes will slow down in the future, U.S. stocks will form a rebound trend before the mid-term elections. The Dow, Mark 500 and Nasdaq rose to 31,836.74, 3,859.11 and 11,199.12 respectively at the time of writing. The expansion of US natural gas exports to the EU will help alleviate the inflation problem in Europe, and it will also help the US itself. It is almost a foregone conclusion that the U.S. interest rate will exceed 5% next year. If inflation cannot be slowed down, the negative impact on the US economy will continue to increase. 

The Hong Kong stock market experienced the "October stock market crash" again. The Hang Seng Index fell below the 15,000 marks for a while, falling more than 12% from the end of September to the date of writing. The Hang Seng Technology Index hit a new low of 2,720. The US interest rate hike cycle is still unfinished. Under the linked exchange rate system, the Hong Kong risk free rate continues to rise, which increases the cost of holding stocks. Therefore, the overall valuation will inevitably be lowered. Even though the valuations of most companies are becoming more reasonable, don't try to find the bottom in a falling market. On the other hand, the rise of the Hong Kong dollar will further weaken the competitiveness of service industries such as tourism. Coupled with the epidemic prevention policy, the incentives for mainland residents to come to Hong Kong will be further reduced if the RMB falls below the Hong Kong dollar. The risk of returning deflation in 2023 should not be ignored. 

Giordano International (0709), which was introduced last month, was subject to a sharp decline in the market and its performance was not as good. However, the company's fundamentals are not subject to the trend of Hong Kong stocks, so the current situation only means that the current valuation is more attractive than before. The historical interest rate is as high as 12.6%, and there is no big problem in continuing to hold it as a mid-line interest rate. As November is the World Cup month, the existing holders can make a decision to maintain the optimistic growth of net profit for the whole year depending on the development of the Middle East business and continue. 

Since the market atmosphere is still bad, my recommendation this month is still mainly based on relatively stable stocks. Yingjian Medical (1419) benefited from the increase in revenue from general medical services and the continuous increase in demand for prevention, testing, vaccination and outreach services (including COVID-19 related services), which led to a record high in revenue and gross profit. As of the end of June this year, the annual net profit was 375 million dollars, an increase of nearly 1.6 times over the previous year, and the net profit per share was 0.989 dollars. Referring to the figures for the first half of the year, the net profit in the second half was nearly 285 million dollars. It is clear that the government's policy in the fifth wave of the epidemic and the provision of testing services at the airport have greatly benefited its income. After the opening of Hong Kong, the number of tourists has increased, and the demand for entry-exit testing has also increased. Therefore, it is expected that the income in the new year will still be maintained. Its current price-earnings ratio is only 1.62 times, and its net assets are 741 million dollars, which has exceeded the current market value of 611 million dollars. This year, the company has also established a 38,000-square-foot large health city in Star House to provide comprehensive medical and medical beauty services. In addition to the participation in the Labour Department's "Pilot Rehabilitation Programme for Employees Injured at Work" and the expansion of Shanghai Yingjian's medical and aesthetic outpatient department, revenue will maintain steady growth this year even if the Hong Kong government gradually relaxes its anti-epidemic policies. Although the current price has slightly fallen below its rising track since the end of January last year, it can still maintain its strength near 1.6 dollars, and buy the mid-line and look at 2.2 dollars.

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.