Market risk aversion rises

The Hong Kong Census and Statistics Department (C&SD) published the June Consumer Price Index (CPI). Overall CPI rose 1.5% YoY in June, up 0.3ppt from 1.2% in May. Excluding the impacts of one-off relief government measures, the Composite CPI rose by 1.0% YoY, compared to 1.0% in May. The respective increases in the CPI(A), CPI(B) and CPI(C) were 1.7%、1.3% and 1.3%. In terms of categories, alcohol and tobacco recorded the biggest jump, up 22.0% YoY, which was the main reason for the increase in June. The YoY decline in durable goods prices stood at 0.6%. Electricity, gas and water, dining out and takeaways, transportation, miscellaneous services and goods all increased.

The underlying consumer price inflation stayed modest in June. Prices of meals out and takeaway food recorded relatively fast increases over a year earlier, while those of basic food saw modest growth. Prices of energy-related items continued to decrease visibly. Price pressures on other major components remained broadly in check. Looking ahead, overall inflation should stay mild in the near term. Domestic cost may face some upward pressures as the Hong Kong economy continues to grow. Meanwhile, external price pressures should remain on a broad moderating trend. In terms of the Hong Kong stock market, the Hang Seng Index may lack upward momentum in the near term. It is expected to fluctuate between 16,700 – 17,700 points.

As Hong Kong stock market remains under pressure, risk aversion has gripped the markets, and investors shift to relatively stable sectors.

Ping An Insurance（2318.HK）’s net profit in Q1 amounted to RMB36.7bn, down 4.3% YoY. Three core businesses, namely life and health insurance (“Life & Health”), property and casualty insurance, and banking, resumed stable growth. New business value (“NBV”) of Life & Health amounted to RMB12.9 billion in Q1, up 20.7% YoY. NBV per agent increased 56.4% YoY. Property and casualty insurance revenue rose by 5.7% YoY to RMB80.6 billion in Q1. Retail customers increased 1.0% YTD to nearly 234 million and contracts per customer reached 2.94 as of March 31, 2024.

Net profit of Ping An Bank grew 2.3% YoY to RMB14.9 billion in Q1. Core tier 1 capital adequacy ratio rose to 9.59% and provision coverage ratio was 261.66% as of March 31, 2024. Ping An partnered with all top 100 hospitals and 3A hospitals in China, and accumulated about 50,000 in-house doctors and contracted external doctors in China as of March 31, 2024. Ping An partnered with approximately 231,000 pharmacies as of March 31, 2024, up by nearly 1,000 YTD. Ping An declared a total dividend of RMB2.43 per share in FY23, with a dividend yield of 8%. It is recommended to buy at HK$32.90, target at HK$38.25, and stop loss at HK$31.50.

China Life (2628.HK) ‘s revenue in Q1 amounted to RMB 121 billion, a YoY increase of 14%. In 1Q24, the Company saw continued growth in the insurance business even on a high base for the corresponding period of 2023. Gross written premiums amounted to RMB337.6 billion, an increase of 3.2% YoY, of which renewal premiums were RMB225.2 billion, an increase of 7.5% YoY. Premiums from new policies stood at RMB112.4 billion, a decrease of 4.4% YoY. The surrender rate was 0.26%, a decrease of 0.14ppts YoY. The total sales force amounted to 679,000, of which the number of agents of the individual agent business sector was 622,000, and the size of the sales force remained stable. Meanwhile, the quality of the sales force was significantly improved, with an increase in both the number and proportion of high-performance agents.

The Company upheld the philosophy of long-term
investment, value investment and prudent investment, and adopted multiple measures to stabilize its investment income. In the first quarter of 2024, the Company achieved gross investment income of RMB64,657 million, an increase of 7.2% YoY, and the annualised gross investment yield was 3.23%. China Life declared a total dividend of RMB0.43 per share in FY23, with a dividend yield of 4%. It is recommended to buy at HK$10.40, target at HK$12.10, and stop loss at HK$9.95.