KGI Asia Commentary

HSI fell 145 points on Wednesday

The Hang Seng Index fell 145 points or 0.9% to 16,228 on Wednesday. HSTECH fell 44 points or 1.2% to 3,686 and HSCEI fell 63 points or 1.1% to 5,550. Daily market turnover was HK$75.4bn.

Dow rises more than 500 points, hits record high, closes above 37,000 for first time

The Dow Jones Industrial Average jumped to a record on Wednesday as the Federal Reserve signaled it would cut interest rates multiple times next year, pleasing investors who want the central bank to adopt less aggressive monetary policy. The Dow Jones index rose 512.30 points to close at 37,090.24 points, an increase of 1.40%. The index closed above 37,000 points for the first time, surpassing the record set in January 2022. The Dow hit an intraday high of 37,094.85 points. The S&P 500 index rose 1.37% to close at 4707.09 points, which was the first time since January 2022 that it exceeded 4700 points. The Nasdaq rose 1.38% to 14733.96 points. All three major stock indexes hit 52-week highs. Shares of Bank of America and Wells Fargo rose about 4% and nearly 3%, respectively, on Wednesday. Banks will benefit if there is a soft landing. Home Depot shares rose 3% as sales could be boosted by a recovery in the housing market.

U.S. annual PPI inflation slowed to 0.9% in November, vs. 1% expected

Data released by the U.S. Bureau of Labor Statistics on Wednesday showed that the U.S. producer price index (PPI) for final demand rose 0.9% in November from the same period last year, lower than the 1.2% increase in October. The data was lower than market expectations of 1%. During the same period, core PPI increased by 2% annually, lower than October's data and analysts' expectations of 2.4% and 2.2%. On a monthly basis, core PPI remained unchanged for the second consecutive month.

Fed's dovish tilt boosts stocks

The central bank kept its benchmark federal funds rate unchanged at a range of 5.25% to 5.5% as expected, but more importantly, it forecast three rate cuts in 2024, more than previously hinted at. With recent inflation data moderating, investors are increasingly looking for a clearer signal from the Federal Reserve that it will begin cutting interest rates next year. The Federal Reserve's meeting statement acknowledged that inflation “has eased” over the past year, and the central bank officially lowered its inflation forecast for 2024 from 2.6% to 2.4%. Fed members estimate that the benchmark interest rate will fall to 4.6% next year, which would mean three or two rate cuts in 2024, compared with the previous forecast of 5.1% rate cuts.

Hong Kong Stock Connect had a net inflow of HK$0.85bn on Wednesday, of which CSOP HS TECH (3033) had the largest net inflow, reaching HK$0.19bn; followed by Sunac (1918). Tencent (700) recorded the largest net outflow at HK$0.58bn, followed by CNOOC (883).