KGI Asia Commentary

HSI fell 251 points on Wednesday

The Hang Seng Index fell 251 points or 1.4% to 18,329 on Wednesday. HSTECH fell 53 points or 1.3% to 4,126 and HSCEI fell 93 points or 1.5% to 6,272. Daily market turnover was HK$97.9bn.

Dow ends lower as U.S. Treasury yields soar

U.S. stocks fell on Wednesday as investors digested the minutes of the Federal Reserve's July meeting, which hinted at a possible hike in interest rates. The Dow Jones Industrial Average fell 180.65 points, or 0.52%, to end at 34,765.74. The S&P 500 fell 0.76% to close at 4,404.33. The Nasdaq Composite fell 1.15% to close at 13,474.63. Technology stocks led the market lower, with chip stocks such as Intel Corporation, Coherent Inc, and Advanced Micro Devices Inc. under selling pressure. Intel shares fell more than 3% after the company abandoned plans to buy Tower Semiconductor after failing to secure timely regulatory support for the deal. Intel will pay a $353 million breakup fee for exiting the deal. Meanwhile, Coherent Inc reported a surprise fourth-quarter loss and issued weaker-than-expected guidance, sending its shares down about 30%. Target Corporation reported second-quarter revenue that fell short of Wall Street expectations and lowered its annual forecast, but the company's shares rose more than 3% as investors cheered signs of lower inventory levels and improved profit margins. Shares of TJX Companies rose 4% after the company reported second-quarter results that beat expectations, with lower costs helping to boost margins.

Fed officials see 'upside risks' to inflation that could lead to further rate hikes, minutes show

Fed officials expressed concern about the pace of inflation at their latest meeting and said further rate hikes may be warranted in the future unless circumstances change, minutes from the FOMC minute released on Wednesday showed. Discussions at the two-day meeting in July led to a 25 basis point rate hike from the Fed, widely expected to be the last hike of the cycle. However, the discussion showed that most members were concerned that the fight against inflation was far from over and that further tightening action might be required. “With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the minutes said. For future policies, the members emphasized two risks. One is to loosen policy too quickly at the risk of rising inflation, and the other is tightening too much, leading to economic contraction.

Hong Kong Stock Connect had a net outflow of HK$3.0bn on Tuesday, of which Tencent (700) had the largest net inflow, reaching HK$0.65bn; followed by Ping An (2318). Tracker Fund (2800) recorded the largest net outflow at HK$5.0bn, followed by HSCEI ETF (2828).