Top traded counters in November 2023 December 19, 2023

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At a glance:

• The Fed kept rate steady at 5.25% and 5.5%
• Falling non-farm payroll in October fuelled expectations of a rate cut
• US dollar reached its lowest point in over three months
• Chinese government favours fiscal stimulus
• Block Inc (SQ.US) increased its full-year adjusted operating income projection to a range of US$205 million to US$225 million from US$25 million previously

November was unforgettable with all 3 indices closing at double-digit growth:

The Federal Reserve (Fed) kept its benchmark interest rates steady between 5.25% and 5.5% in its latest meeting. At the meeting, officials expressed a need for more urgency to raise interest rates, emphasising a commitment to proceed cautiously based on future data¹. According to the meeting minutes, officials are focused on monitoring inflation progress, seeking signs of demand moderation and labour market cooling. They stressed the need for the policy to remain restrictive until inflation moves down. Economic uncertainties, including potential slow growth and risks to inflation, have contributed to the Fed’s cautious stance. The main debate among policymakers has shifted to when and how quickly the Fed might cut its benchmark interest rate in the future, with traders predicting such moves around the middle of 2024.

The falling non-farm payroll in October fuelled expectations of a rate cut in 2024. In that month, the US economy experienced a deceleration in job creation, with nonfarm payrolls increasing by 150,000, falling short of the forecasted 170,000². United Auto Workers strikes were a significant factor in this slowdown, resulting in a net loss of jobs in the manufacturing industry. The unemployment rate rose to 3.9%, the highest since January 2022, and a broader jobless rate, including discouraged workers, reached 7.2%. The winter cooling in the labour market was attributed to companies holding onto employees after the post-pandemic hiring frenzy.

As the US economy started to slow down, the US dollar reached its lowest point in over three months³. Fed Board of Governor member Christopher Waller’s mention of a possible rate cut in the coming months further contributed to the dollar’s decline. Waller suggested that if the decline in inflation persists for several more months, the policy rate could be lowered.

Turning to the second-largest global economy, the Chinese government favours fiscal stimulus, particularly through increased infrastructure investment, to achieve proposed growth targets ranging from 4.5% to 5.5% for 2024⁴. While monetary policy is expected to play a limited role, there are calls for greater tolerance for exchange rate fluctuations. The debate between structural reforms and stimulus measures continues, with political constraints hindering significant market-oriented reforms. The outcomes of the annual Central Economic Work conference will shape China’s economic trajectory in the face of global uncertainties.

With the higher probability of a rate cut in 2024, and the stimulus injected by the Chinese government, here are some ETFs for your consideration:

iShares MSCI China ETF (NYSE-ARCA: MCHI.US)

MCHI is an ETF that seeks to track the investment results of an index composed of Chinese equities that are available to international investors⁵. The ETF allows investors to have exposure to large and mid-sized companies in China with Tencent Holdings LTD, Alibaba Group Holding LTD, and Meituan being the top 3 holdings. The top 3 sectors the ETF focuses on are consumer discretionary, communication, and financials. MCHI commenced on 29 March 2011 with an expense ratio of 0.58%. As of 30 September 2023, MCHI’s 5-year performance is -4.77%.

MCHI opened at US$41.64 and rose 2.5% to close at US$42.68 in November.

Technical Analysis

Status: Neutral

Support: 39.70 – 40.65

Resistance: 44.70 – 45.30

Range-bound

iShares China Large-Cap ETF (NYSE-ARCA: FXI.US)

FXI is an ETF that seeks to track the investment results of an index composed of large-capitalisation Chinese equities that trade on the Hong Kong Stock Exchange⁶. The ETF gives investors access to 50 of the largest Chinese stocks, with the top 3 holdings being Tencent Holdings LTD, Alibaba Group Holding LTD and Meituan. The top 3 sectors covered are Consumer Discretionary, Financials, and Communication. FXI commenced on 10 May 2004 with an expense ratio of 0.74%. As of 30 September 2023, FXI’s 5 year performance is -7.14%.

FXI opened at US$25.35 and slid by 0.75% to close at US$25.16 in October.

Technical Analysis

Status: Slight bearish

Support: 23.20 – 23.70

Resistance: 25.00 – 25.30

Although slightly bearish, the price is currently approaching a major demand level, which will become a point of support. FXI’s price will have to hold above the demand to see its price head towards immediate resistance.

Here are some of the more popular US stocks – not ranked in any order – traded by POEMS customers in November 2023.

Advanced Micro Devices (NASDAQ: AMD)

AMD reported Q3 earnings that exceeded analyst expectations, with an adjusted earnings per share (EPS) of US$0.70 compared to the expected US$0.68, and revenue hitting US$5.8 billion against the anticipated US$5.7 billion, suggesting robust financial performance during this period. However, the company issued a Q4 forecast of US$6.1 billion in sales, falling short of analysts’ expectations of US$6.37 billion. AMD, a notable player in high-end GPU manufacturing for generative AI models, faces competition from Nvidia (NASDAQ: NVDA) in this market. The upcoming AI chips, MI300A and MI300X, are expected to enter volume production this quarter.

CEO Lisa Su emphasised AMD’s focus on becoming a major player in the growing generative AI workload market, highlighting recent AI acquisitions and improvements in the company’s AI software suite. Despite the initial market reaction, AMD remains optimistic about its AI chip business, projecting substantial revenue growth in the coming years.⁷

In the month of November, AMD opened at US$98.58 and gained 22.91% to close at US$121.16.

According to a Phillip Securities Research report dated 3 November 2023, the recommendation for AMD is Neutral.

Technical analysis

Status: Neutral

Support: 110.30 – 111.70

Resistance: 125.30 – 125.50

Price will need to hold above the immediate demand level for the price to attempt reaching 125.00 again.

Airbnb Inc (NASDAQ: ABNB)

ABNB shares dipped approximately 3% in after-hours trading following its earnings report, despite reporting robust revenue that exceeded expectations, due to favourable currency conditions. EPS was US$6.63, significantly surpassing the anticipated US$2.10. Revenue reached US$3.40 billion, slightly higher than the expected US$3.37 billion.

The dip in share value despite robust revenue could be attributed to a more cautious outlook for the upcoming fiscal quarter by ABNB, guiding for US$2.13 billion to US$2.17 billion in revenue, which fell slightly short of analysts’ expectations of US$2.18 billion. ABNB also mentioned the increased volatility in the early stages of Q4 and acknowledged monitoring macroeconomic trends and geopolitical conflicts that could impact travel demand, injecting an element of uncertainty.

Looking forward, the company highlighted efforts to manage consumer costs amid industry-wide price increases, with the average nightly price of a one-bedroom listing in September rising only 1% YoY to US$120. Additionally, there are plans to enhance listing verifications in the US and four other countries later in the year.⁸

In the month of November, ABNB opened at US$118.25 and gained 6.84% to close at US$126.34.

According to a Phillip Securities Research rreport dated 3 November 2023, the recommendation for ABNB is Buy.

Technical analysis

Status: Neutral

Support: 112.60 – 115.45

Resistance: 152.30 – 158.60

Range Bound

Apple Inc (NASDAQ: AAPL)

After AAPL’s fiscal fourth-quarter earnings report, the company experienced a 3% drop in after-hours trading, despite surpassing analyst expectations in both EPS and revenue. The reported EPS was U$1.46, beating the expected US$1.39, and revenue reached US$89.5 billion, exceeding the anticipated US$89.28 billion.

The fall in share price could be due to the uncertainty about the firm’s future outlook. Investors also raise concerns about the sales of AAPL’s third largest market, Greater China, due to rising competition from Huawei, resulting in flat year over year sales.⁹

The company also announced a dividend payment of US$0.24 per share for this month and disclosed that the company invested US$25 billion in the quarter for share repurchases and dividends.

In the month of November, AAPL opened at US$171 and gained 11.08% to close at US$189.95.

According to a Phillip Securities Research report dated 6 November 2023, the recommendation for AAPL is Accumulate.

Technical Analysis

Status: Bullish

Support: 187.00 – 187.90

Resistance: 195.80 – 200.00

Bullish but price is reaching the immediate supply area with a psychological level of 200.00

Block Inc (NYSE: SQ)

SQ saw a notable 19% surge in after-hours trading following the announcement of its Q3 financial results, which outperformed analyst projections on various fronts. SQ’s adjusted earnings per share reached US$0.55, surpassing the anticipated US$0.47, and its revenue hit US$5.62 billion, exceeding the expected US$5.44 billion. This robust performance triggered a US$1 billion stock buyback, and the company adjusted its guidance, anticipating full-year adjusted EBITDA to be in the range of US$1.66 billion to US$1.68 billion, up from the previous guidance of US$1.5 billion.
Additionally, SQ revised its full-year adjusted operating income projection to a range of US$205 million to US$225 million, marking a substantial increase from the initial guidance of US$25 million. The revision in operating income projection, nearly tenfold, serves as compelling evidence of the company’s confidence in its future performance.¹⁰

In the month of November, SQ opened at US$39.95 and gained 58.77% to close at US$63.43.

According to a Phillip Securities Research report dated 8 November 2023, the recommendation for SQ is Buy.

Status: Slightly bullish

Support: 51.70 – 52.98

Resistance: 80.30 – 83.00

Price is currently at a delicate level, will need price to close bullishly above 65 and sustain itself for further up move.

Nvidia Corporation (NASDAQ: NVDA)

NVDA reported its fiscal Q323 results that surpassed Wall Street’s expectations in the month of November. The company reported revenue of US$18.12 billion, higher than the expected revenue of US$16.18 billion, and adjusted earnings of US$4.02 per share surpassed the expected of US$3.37 earnings per share, marking a 206% YoY revenue growth. Despite delivering robust performance, NVDA witnessed a 1% decline in after-hours trading, likely attributed to the anticipation of a negative impact in the upcoming quarter, stemming from export restrictions affecting sales to organisations in China and other regions.

Looking forward, NVDA targets US$20 billion in revenue for the fiscal Q423, implying nearly 231% revenue growth. Challenges include export restrictions impacting GPU sales in China, but the company remains committed to expanding its supply throughout the next year.

In the month of November, NVDA opened at US$408.84 and gained 14.40% to close at US$467.70.

According to a Phillip Securities Research report dated 27 November 2023, the recommendation for NVDA is Buy.

Technical analysis

Status: Neutral

Support: 430.80 – 434.50

Resistance: 492.90 – 503.00

Range Bound

CONCLUSION

In summary, the recent decisions by the Fed, coupled with the economic landscape in both the US and China, underscore the intricacies of global financial dynamics. The Fed’s cautious stance, contemplating future rate cuts amid economic uncertainties and a potential slowdown, has influenced the depreciation of the US dollar. Concurrently, China’s focus on fiscal stimulus for targeted growth, alongside the ongoing debate on structural reforms, reflects the multifaceted challenges faced by major economies. The interconnectedness of these factors suggests a nuanced approach for investors. Against this backdrop, the higher likelihood of a 2024 rate cut in the US and the proactive stimulus measures in China may lend some support to the Chinese market. As global uncertainties persist, strategic and diversified investment decisions become paramount in navigating the evolving financial landscape.

Bloomberg analysts’ recommendations

The table below shows the consensus ratings and average ratings of all analysts updated on Bloomberg in the last 12 months. Consensus ratings have been computed by standardising analysts’ ratings from a scale of 1 (Strong Sell) to 5 (Strong Buy). The table also shows a number of analysts’ recommendations to buy, hold or sell the stocks, as well as their average target prices.

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Reference:

• ^[1] “Federal Reserve officials showed little urgency to raise interest rates ….” 21 Nov. 2023
• ^[2] “U.S. payrolls increased by 150000 in October, less than expected.” 3 Nov. 2023
• ^[3] “US dollar skids to 3-1/2-month low, headed for biggest … – Reuters.” 29 Nov. 2023
• ^[4] “Exclusive: China government advisers call for steady growth target ….” 21 Nov. 2023
• ^[5] ” mchi-ishares-msci-china-etf-fund-fact-sheet-en-us.pdf.”
• ^[6] “fxi-ishares-china-large-cap-etf-fund-fact-sheet-en-us.pdf”
• ^[7] “AMD earnings report Q3 2023 – CNBC.” 31 Oct. 2023″
• ^[8] “Airbnb beats on revenue but offers weaker-than-expected guidance.” 1 Nov. 2023
• ^[9] “Apple stock dips after weak outlook for December quarter revenue.” 2 Nov. 2023
• ^[10] “Block Inc. Target Price S$85.00 – Stock Analyst Research | POEMS.” 8 Nov. 2023