KGI Asia Commentary

Hang Seng Index fell 175 points on Wednesday

The Hang Seng Index fell 175 points or 0.9% to 20,309 on Wednesday. HSTECH fell 81 points or 1.9% to 4,166 and HSCEI fell 83 points or 1.2% to 6,866. Daily market turnover was HK$108.0bn.

U.S. stocks end lower on Wednesday amid recession fears

U.S. stocks closed lower on Wednesday, as the minutes of the Federal Reserve's March interest rate meeting revealed concerns about a recession. The release of the Fed minutes came after data showed that inflationary pressures were cooling. Members now expect a " mild recession" later this year in the wake of the banking crisis and showed they came close to agreeing to pause rate hikes in March. Fears of a recession and its impact on consumers forced consumer stocks lower, with travel and leisure and retail stocks falling. Norwegian Cruise Line, Carnival Cruise Line and Caesars Entertainment were among the biggest decliners in the consumer sector.

U.S. inflation at 5%, lowest level since 2021

The CPI rose 5% in March, down from 6% in February, the Bureau of Labor Statistics reported Wednesday. Housing costs contributed the most to the monthly increase, offsetting a sharp decline in the energy category. Core inflation was 5.6% in March, compared with 5.5% in February. Core inflation, which excludes volatile energy and food prices, held steady, a sign that the slowing pace could be attributed to comparisons against soaring gas prices a year ago, following Russia's invasion of Ukraine.

Fed expects banking crisis to cause a recession this year

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said. Projections following the meeting showed , Fed officials expect gross domestic product (GDP) growth of just 0.4% for all of 2023. Given that first-quarter growth tracked by the Atlanta Fed was around 2.2%, that would suggest a pullback later in the year.

Hong Kong Stock Connect had a net inflow of HK$0.25bn on Wednesday, of which CNOOC (853) had the largest net inflow, reaching HK$0.29bn; followed by China Unicom(762). Tencent (700) recorded the largest net outflow at HK$1.36bn, followed by Meituan (3690).