The suspension of loans and supply in Chinese property has spread across the country, affecting hundreds of projects, adding to the current negative economic situation brought about by the pandemic. The main reason is that the capital chain of domestic housing enterprises was misappropriated, transferred or even directly embezzled the pre-sale funds, resulting in unfinished projects. Thus, the owners collectively stopped paying mortgages as a confrontation. In order to reverse the situation, the State Council approved the establishment of a real estate fund to support financially distressed domestic houses, even measures such as a loan repayment buffer period for home buyers are helpful to the market in the short and medium term. However, it is very difficult to rebuild confidence in the mainland market in housing companies. Individual smaller private housing companies will not escape the fate of bankruptcy. Therefore, the prices of stocks related to domestic real estate companies, such as building materials, banks, insurance and other financial services are still easy to fall and hard to rise in the short term. Investors are advised to stay away from the above classes of shares for the time being.

In Hong Kong, the recent expansion of the interest rate gap between the US dollar and the hole is expected to increase in the near future, and the banks will continue to exist. It is not surprising that individual brokerages expect the balance of the banking system will be zero this month. Insufficient balances in the banking system will induce banks to raise interest rates to attract depositors. Credit rates will rise on the premise of rising costs. In the future, as long as the Hong Kong Association of Banks follows the Federal Reserve's interest rate meeting, or even raises the interest rate at a higher rate than the Federal Reserve, funds will flow back into the Hong Kong banking system that driving the balance back up. The market has already expected that the prime rate (P) will start to rise this quarter, so the property market in Hong Kong will inevitably be negatively affected. However, there is still no news of customs clearance and the burst in the mainland real estate market. This will be bound to further put pressure on the Hong Kong real estate market. In the stock market, although the trend of the Hang Seng Index remained weak, the Hong Kong dollar strengthened against the major foreign exchange (except the US dollar). Also, the capital flow was slow so that it could still stand above the 20,000-point mark. Under the premise of the lifting of epidemic prevention restrictions, market confidence is stabilizing. As for the future development, it always depends on the lifting time of customs clearance restrictions. It seems that the dawn will only be seen in the fourth quarter.

As for the global inflation problem that continues in the market, the US CPI surged 9.1% year-on-year in June, forcing the Federal Reserve to raise interest rates by 0.75%, which was completely expected by the market. Investors have different views on the outlook for the US stock market. The author personally believes that although inflation has temporarily reached to the peak, the high valuation of aesthetic stocks is facing the problem of increased financing costs, which is not as optimistic as in the past. The S&P 500 is currently trading at about 16 times earnings. The average level of about 15.5 times in the past 40 years is slightly higher, which is still far from "cheap". There are still many problems in the current supply chain, and the rise of US stocks will still be limited in the future. If we want to return to the bull market, we must wait for inflation and interest rates to reach the peak. Relatively, the possibility of a long-term recession in the US economy is low, so the performance of US stocks is still better than that of Chinese and Hong Kong stocks. The foreign exchange view is roughly the same as last month. As there are still opportunities for further interest rate hikes in the fourth quarter, strong currencies such as the US dollar, Canadian dollar and Swiss franc, which have strong interest rate hike conditions, are still relatively strong. If there is a short-term rebound for the weak UK dollar, euro and yen, the situation seems not to be long-term.

The stock price performance of a series of stocks introduced last month is acceptable, but the current market situation is really uncertain. It is recommended to exit first or strictly observe the stop loss/profit price. This month, I recommend Hong Kong Ferry (0050). The company has no bank loans, its expenses are not affected by the tide of interest rate hikes, and its net assets exceed RMB 6 billion. This year, the revenue from the sale of the imperial property in cooperation with the Imperial Group will be recorded, and the Tongzhou Street project is also ready to be sold. Of the remaining rental collection projects on hand, 1.337 billion of the 1.34 billion in inventory are buildings, plus 1.683 billion in cash and 3.6 billion in investment properties. However, the company's return on assets is too low, so there are new actions recently. In the fourth quarter of last year, the former Chief Operating Officer of Medical Care (2138) was recruited, and the medical beauty clinic and high-end beauty service center covering an area of ​​more than 10,000 square feet will open, gradually transforming it into a "medical beauty stock". In addition, the company will celebrate its 100th anniversary next year. It has announced in advance that it will distribute a special interest rate of 1 dollar. The interest rate is expected to exceed 18%. It will be more appropriate to avoid the recent storms as a mid-line investment.

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.