CGS International April 30, 2025
HSBC Uptrend Resumes, Champion REIT Outlook Challenged: Hong Kong Retail Insights
Market Pulse: Wall Street’s Cautious Optimism Amid Economic Headwinds
Overnight market activity saw Wall Street traders carefully extending the recent stock rebound. Despite concerning consumer confidence and labor data, investors pushed the S&P 500 towards its most significant six-day gain since March 2022, marking a 7.5% rise during this period. This optimism persists even as several corporate giants withdrew earnings guidance due to uncertainties stemming from President Donald Trump’s trade policies and tariff impacts.
Earlier equity declines were linked to these uncertainties and President Trump’s reported threat to dismiss Federal Reserve Chair Powell. However, a segment of bullish investors is driving the market comeback, possibly fueled by a fear of missing out (FOMO) on the initial phase of a recovery, recalling historical US market rebounds. Furthermore, growing expectations that the Federal Reserve might cut interest rates to stave off a recession are contributing to a potential risk-on sentiment.
Nevertheless, caution remains warranted. The US economy, after a period of comfortable growth last year, showed signs of slowing at the beginning of 2025. Factors like consumer fatigue and a widening trade deficit suggest a significant economic impact during the first quarter. Investors continue to prefer short-dated Treasuries, bracing for a potential further slowdown in US economic activity.
HSBC Holdings PLC (HKG: 5): Technical Buy Signal Strengthens as Uptrend Re-engages
CGS International is reiterating and adding to its technical buy recommendation for HSBC Holdings PLC (5), following the stock surpassing previous targets and showing renewed upward momentum.
Current Status and Performance: The stock recently traded at HK$88.35. It has already moved beyond the third target price of HK$85.40 set in the previous analysis dated November 5, 2024, and is approaching the final target of HK$92.00 from that report. The recent price action confirms the uptrend is back in play after filling a prior bearish gap.
Key Technical Indicators Pointing Bullish: Several technical factors support the positive outlook:
- Price Action: After consolidating near its lows since April 2024, recent price movements have formed an ascending triangle pattern, often indicating a potential bullish reversal.
- Ichimoku Cloud: The Ichimoku indicator is displaying strong bullish signals.
- MACD: The Moving Average Convergence Divergence (MACD) indicator has risen steadily above the zero line, with a positive histogram reinforcing bullish momentum.
- Stochastic Oscillator: This momentum indicator recently executed a bullish crossover above the 50-level.
- Rate of Change (ROC): The 23-period ROC has climbed above the zero line, suggesting increasing upward momentum.
- Directional Movement Index (DMI): The DMI confirms strong bullish strength in the current trend.
- Volume: Trading volume remains healthy and is expanding, supporting the price move.
Trading Strategy and Levels:
| Entry Price(s) |
HK\$88.35, HK\$82.00, HK\$78.00 |
| Support 1 |
HK\$86.15 |
| Support 2 |
HK\$75.55 |
| Stop Loss |
HK\$72.60 |
| Resistance 1 |
HK\$96.75 |
| Resistance 2 |
HK\$116.00 |
| Target Price 1 |
HK\$95.00 |
| Target Price 2 |
HK\$105.00 |
| Target Price 3 |
HK\$116.00 |
| Target Price 4 |
HK\$121.50 |
Alternative Exposure: Traders seeking different exposure or potentially reduced foreign exchange risk could consider HSBC’s Singapore Depository Receipts (SDR) listed on the SGX under the ticker HSHD, recently trading at S$2.98.
Company Overview: HSBC Holdings plc serves as the holding company for the globally operating HSBC Group. The company delivers a wide array of international banking and financial services. These encompass retail and corporate banking, trade finance, trusteeship, securities services, custody, capital markets activities, treasury operations, private banking, investment banking, and insurance services.
Analyst: CHUA Wei Ren, CMT
Champion REIT (CREIT): Recent Surge Deemed Unjustified, Maintain Reduce
Despite a strong year-to-date performance, CGS International believes the recent outperformance of Champion REIT (CREIT) is not fundamentally justified and maintains a ‘Reduce’ rating.
Performance Analysis: CREIT’s share price has surged 26% year-to-date. This significantly outpaces the 17% rise in Link REIT and the 22% increase in the Hang Seng Property Index over the same period.
Privatisation Doubts: Market speculation might include potential privatisation by majority shareholder Great Eagle. However, CGS International views this likelihood as low. CREIT’s current valuation, trading at a 56% discount to Net Asset Value (NAV), appears relatively expensive compared to the average peer discount of 62%, potentially deterring such a move.
Challenging Office Market Outlook: The significant share price outperformance is considered unjustified given the difficult outlook for the Hong Kong office market. CGS International anticipates negative rental reversions for CREIT’s portfolio in the fiscal years 2025 and 2026 (FY25F/26F).
Recommendation and Target Price: CGS International reiterates its ‘Reduce’ recommendation for CREIT. The target price has been slightly increased to HK$1.53, which implies a forecasted Distribution Per Unit (DPU) yield of 9.02% for FY25F.
