【vashon theater times】Can Hang Seng Recover From Its 6-Month Long Decline?
China and Hong Kong equities closed the last trading day of October in the green. However,vashon theater times the Shanghai Composite Index as well as the Hang Seng Index witnessed significant declines in the month of October.
Huge monthly losses in one of the key components of Hang Seng Index, Tencent Holdings Limited TCEHY weighed on investor sentiment. Along with a tech sell-off, the ongoing trade war between the United States and China and worries over weak Chinese economic growth weighed on the indexes.
Hang Seng Index Posted Longest Decline Since ’82
The Hong Kong-based index, Hang Seng increased 1.6% on the Oct 31. However, the index registered a monthly decline of 10.1% in October, its sharpest since January 2016. Moreover, the index has posted declines for six straight months, its longest in last 36 years. Additionally, the Shanghai Composite Index, which has remained the worst-performing equity index so far this year also fell 7.8% in October, its biggest loss since June.
The monthly decline in key indexes of China and Hong Kong came after China’s Official NBS Manufacturing PMI decreased from 50.8 in September to 50.2 in October. This report revealed the slowest expansion in manufacturing PMI since a contraction in July 2016.
Additionally, the official NBS Non-Manufacturing PMI slumped from 54.9 in September to 53.9 in October. This is the slowest expansion pace for the non-manufacturing PMI since August 2017. Factory activity in the world’s second-biggest economy slowed in October, following continued trade war tensions between the United States and China.
Tencent Weighs on Hang Seng
Tencent Holdings rose 5.9% on Oct 31 following strong performance by all the three key U.S. indexes. Despite posting an increase on the day, the Internet service portal posted a monthly decline of 17%, its worst such performance since November 2011.
Along with Tencent, other big technology companies included on the Hang Seng index, AAC Technologies Holdings Inc. AACAY and Sunny Optical Technology (Group) Company Limited SNPTF fell 29.6% and 29.2%, respectively, for the month of October. Out of the 50 components of the Hang Seng index, 47 including the above three tech giants posted monthly losses and weighed on the index.
Regulator to Improve Ease of Trading
Despite sluggish monthly performance, all is not lost for the indexes in Hong Kong and China after the China Securities Regulatory Commission said on Oct 30 that the regulator will focus on securing long-term investment and improve market liquidity. The commission added that it will build a level playing field for listed companies and reduce unnecessary interference in trading.
Story continues
In this context, focus has shifted to the companies domiciled in Hong Kong. Some of such companies, including Xtep International Holdings Ltd. XTEPY and Sun Hung Kai Properties Ltd. SUHJY have a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Conclusion
Hang Seng index fell for six consecutive months in October, its longest stretch of losses in the last 36 years. Declines in tech companies like Tencent, weak Chinese PMIs and the ongoing trade war between the United States and China weighed on the index. However, regulators are making positive efforts to curtail losses in coming months.
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下一篇：AppFolio, Inc. Announces First Quarter 2020 Financial Results
![5%, led by a 17% increase in average ticket and a slight decline in traffic. Growth in the quarter reflected the impact of households stocking up on essentials like paper goods and cleaning supplies as the pandemic became a nationwide concern, along with strength in discretionary categories as the quarter came to a close and stimulus dollars and tax refunds were disbursed.</p><br><p>As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.</p><br><p>The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.</p><br><p>The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.</p><br><p>In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.</p><br><p>Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.</p><br><p>As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.</p><br><p>Conclusion</p><br><p>In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.</p><br><p>Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?</p><br><p>Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.</p><br><p>Disclosure: None</p><br><p>Read more here:</p><br><p>Under Armour: A Tough Start to 2020</p><br><p>Walmart: Continued Omni-Channel Progress</p><br><p>Match: An Impressive Start to 2020</p><br><p>Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.</p><br><p>This article first appeared on</p><br><p>GuruFocus</p><br><p>.</p><br><p>Warning! GuruFocus has detected 4 Warning Signs with DLTR. Click here to check it out.</p><br><p>DLTR 30-Year Financial Data</p><br><p>The intrinsic value of DLTR</p><br><p>Peter Lynch Chart of DLTR</p><br><p>View comments</p><br>](http://n.sinaimg.cn/news/transform/w600h400/20180308/z2uw-fxpwyhv9306507.jpg?zdy)
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