KGI Asia Commentary

Hang Seng Index rose 198 points on Friday

The Hang Seng Index rose 198 points, or 1.2%, to 17,090 points on Friday; the China National Index rose 76 points, or 1.3%, to 6,017 points; the Hang Seng Technology Index rose 70 points, or 2.1%, to 3,437 points. The total daily turnover of the market was HK$88 billion.

The three major U.S. stock indexes closed lower on Friday

U.S. stocks closed slightly higher on Friday. The Dow Jones index rose 51.44 points, or 0.13%, to 39497.93 points; the Nasdaq index rose 85.28 points, or 0.51%, to 16745.30 points; the S&P 500 index rose 24.87 points, or 0.47%, reported 5344.18 points. Last week, all three major indexes closed down. The Dow fell 0.6% for the week, the S&P 500 fell 0.04%, and the Nasdaq fell 0.18%. Both the S&P 500 and the Nasdaq posted their fourth consecutive weekly decline.

After Monday's plunge, U.S. stocks rebounded strongly in the middle and late stages of this week. Judging from the performance of the week, although the three major stock indexes all recorded declines, they basically recovered most of the losses caused by Monday's plunge. Mainly due to the sharp decline in initial jobless claims data released by the U.S. Department of Labor on Thursday last week, which helped investors ease concerns about the contraction of the labor market and the U.S. economic recession.

Swaps traders further reduced bets on significant Fed easing in 2024. The repricing of global interest rates has been so dramatic that interest rate swaps once suggested a 60% chance of an emergency rate cut by the Fed next week, well before its next scheduled meeting in September. Current pricing suggests a rate cut of around 40 basis points is likely in September.

China core inflation slows

Last Friday, the National Bureau of Statistics of China released inflation data for July. Overall inflation increased by 0.5% year-on-year, which was better than market expectations of 0.3% and the previous value of 0.2%. However, the core inflation data narrowed to an increase of 0.4% year-on-year, compared with the previous value of 0.6%. This reflects that the current round of inflation data is driven by the increase in food, and the sluggish terminal consumption has dragged down the core inflation growth.

The net inflow of Hong Kong Stock Connect on Friday was HK$2.28 billion. Tencent (700) had the largest inflow, reaching 1.1 billion Hong Kong dollars; followed by Tracker Fund (2800). China Mobile (941) recorded the largest net outflow of HK$490 million, followed by China Telecom (728).