I. Performance of Global Equity Indices (in US dollars)
Source: Bloomberg, 15/04/2024-21/04/2024
II. Key Market Themes
i. US Retail Exceeds Expectations Again, Fed Officials Speak Intensively, Market Adjustment Volatility Intensifies
•In March, US retail sales rose by 0.7% month-on-month, exceeding the market's expectation of 0.3%. At the same time, the month-on-month growth rate for February was revised up from 0.6% to 0.9%. This reflects the continued strong consumption by US residents and confirms the resilience of the US economy.
•Recently, Powell reiterated in a public speech that "the economy is robust, labor force is strong, and the decline in inflation lacks data support, so there is currently no sufficient confidence to cut interest rates." This time, Powell also clearly sided with the "supply-side" camp, believing that inflation can be lowered in the future through labor supply and efficiency improvements.
•At the same time, other Federal Reserve officials have been speaking intensively recently, mostly maintaining a unified stance of "No rush on rate cut". Among them, Atlanta Fed President Bostic even stated, "If inflation stagnates or continues to rise, we can only consider raising interest rates."
•Currently, market expectations for interest rate cuts have weakened again, with only one rate cut expected in September. Comments from Fed officials about "possibly resuming rate hikes" have changed the previous market narrative of "rate hikes have peaked", leading to sharp market fluctuations. We believe that the market has fully priced in the idea of "no rush to cut rates", but the "rate hikes have not peaked" black swan narrative still needs subsequent inflation data to confirm. Changes in earnings expectations brought by the recent earnings season could further determine the direction of the broader market.
ii. Giant Corporations' Earnings Reports Trigger Market Concerns, AI Sector Experiences "Black Friday", Sentiment is the Main Factor
•Recently, lithography giant ASML $阿斯麦(ASML)$ released its Q1 2024 financial report, with quarterly revenue of 5.29 billion euros, a year-on-year decline of 21.6%, falling short of market expectations. Although net profit slightly exceeded expectations, the revenue guidance for Q2 2024 was still insufficient. In response, ASML's stock plummeted by 7% on the same day.
•A day later, the world's largest chip manufacturer, TSMC $台积电(TSM)$ , also released its Q1 financial report. Even though revenue and profit growth exceeded market expectations, its mobile business and smart car business showed sluggish growth. This sparked market concerns, leading to a massive sell-off of its stock.
•The recent earnings reports of industry giants all indicate a common issue: "The overall recovery of the semiconductor industry may be slower than market expectations." As a result, market sentiment reached a critical point. On Friday, slight movements in AMD $美国超微公司(AMD)$ directly triggered a significant pullback in the AI sector, with NVIDIA $英伟达(NVDA)$ also experiencing a massive single-day decline of 10%.
•We believe that the market sentiment during this sharp decline is the main factor, and it does not mean the end of the AI revolution. On one hand, the repeated delays in rate cut expectations have made market funds very conservative, causing panic at the slightest sign of trouble. On the other hand, in TSMC's financial report, the strong growth of its AI-related HPC business still shows the unstoppable momentum of the AI trend. The recent round of pullbacks has released some pressure, but the extent and depth still need to be monitored in the coming weeks, especially the capital expenditures of major cloud companies in the AI sector.
iii. China's Mainland Issues "Nine Articles 2024", Focus on Medium to Long-term Capital Market Opportunities in Greater China
• Recently, the State Council of China issued the "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting the High-Quality Development of the Capital Market" (referred to as "Nine Articles 2024"). Overall, the 2024 version of the "Nine Articles" essentially responds to the calls for market system reform over the past six months. It clearly emphasizes the need to establish and cultivate a market ecosystem for long-term investment, improve foundational systems that align with long-term investment, and construct a policy framework that supports "long money, long head", with the aim to strengthen the regulation of cash dividends by listed companies and promote the enhancement of investment value by listed companies. It provides both direction and specific measures.
• Compared with the two previous versions of the "Nine Articles", the 2004 version focused on the foundational and regulatory construction of the capital market; the 2014 version emphasized marketization, rule of law, and internationalization. This year, it places more emphasis on promoting the high-quality development of the capital market through strengthened supervision and risk prevention. Centered around the core themes of "strong regulation, risk prevention, and high-quality development", it guides more medium to long-term funds into the market. Therefore, it is worthwhile to pay attention to the growth opportunities in the capital markets of the Greater China region from a medium to long-term perspective.
Disclaimer
1. The information contained in this document is for reference only and does not constitute any financial advice or a transaction offer, solicitation, suggestion, recommendation or any guarantee for any financial product, strategy or service. You should make your own investment decisions and bear the risk of investment responsibility independently.
2. The content of this document is based on reliable data sources that the staff believed to be reliable at the time of production. The Tiger Investment Research team may adjust without prior notice. The Tiger Investment Research team does not guarantee the accuracy, reliability or completeness of the content of this document, and does not assume any responsibility for any transactions arising from the content of this article and its derivative consequences.
3. This document is confidential and non-public and can only be accessed by professionals with corresponding risk-taking capabilities and preferences. Without the prior consent of Tiger, no one may copy or distribute it in any form.
Comments