KGI Asia Commentary

Hang Seng Index fell 448 points on Tuesday

The Hang Seng Index fell 448 points or 2.3% to 19,247 on Tuesday. HSTECH fell 100 points or 2.6% to 3,790 and HSCEI fell 151 points or 2.3% to 6,439. Daily market turnover was HK$130.8bn.

Dow closes more than 300 points higher as bank stocks rebound

U.S. stocks rose on Tuesday, with investors betting that the risk of contagion from the collapse of Silicon Valley Bank and Signature Bank had been contained. The Dow Jones Industrial Average closed at 32,155.40, up 336.26 points, or 1.06%, snapping a five-day losing streak. The S&P 500 gained 1.65% to close at 3,919.29. The Nasdaq Composite gained 2.14% to close at 11,428.15. The SPDR S&P Regional Bank ETF (KRE) closed up 2%, recovering from a 12% drop the previous day. Shares of First Republic Bank surged nearly 27% after closing down nearly 62% on Monday.

Moody’s cuts outlook on U.S. banking system to negative

“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.

The United States established a mechanism to ensure that institutions experiencing liquidity problems have access to cash. The Treasury is backing the plan with $25 billion in funding, promising that depositors with more than $250,000 in SVB and Signature will have full access to their funds. But Moody’s said that concerns remain.“Banks with substantial unrealized securities losses and with non-retail and uninsured US depositors may still be more sensitive to depositor competition or ultimate flight, with adverse effects on funding, liquidity, earnings and capital,” the report said.

Inflation in February in line with expectations

The U.S. Department of Labor announced on Tuesday that the February consumer price index (CPI) rose 0.4% month-on-month and 6% year-on-year. Both figures were exactly as expected. Excluding the volatile food and energy prices, the core CPI rose 0.5% year-on-year in February and 5.5% year-on-year. On a monthly basis, it was slightly higher than the 0.4% estimate, but the year-on-year increase was in line with expectations. After the release of the report, the possibility that the Fed will raise the benchmark interest rate by 25 basis points increased next week.

Hong Kong Stock Connect had a net inflow of HK$4.89bn on Tuesday, of which Tencent (700) had the largest net inflow, reaching HK$1.2bn; followed by China Mobile (941). CNOOC (883) recorded the largest net outflow at HK$0.23bn, followed by Greatwall Motor (2333).