KGI Asia Commentary
Hang Seng Index rose 332 points on Wednesday
The Hang Seng Index rose 332 points or 1.7% to 19,591 on Wednesday. HSTECH rose 43 points or 1.1% to 4,009 and HSCEI rose 90 points or 1.4% to 6,639. Daily market turnover was HK$106.9bn.
Stocks fall on Wednesday as Fed remains on rate hike
Stocks tumbled on Wednesday as the Federal Reserve continued to raise interest rates. Regional banks led losses. U.S. Treasury Secretary Janet Yellen told the U.S. Senate appropriations subcommittee that the U.S. was not currently working on “blanket insurance” for bank deposits. The Dow Jones Industrial Average fell 530.49 points, or 1.63%, to 32,030.11. The S&P 500 fell 1.65% to close at 3,936.97. The Nasdaq Composite fell 1.6% to close at 11,669.96. The Fed raised interest rates by 25 basis points, in line with market consensus expectations. The Fed’s policy-setting committee said in a statement that it “will closely monitor incoming information and assess the implications for monetary policy.” Additionally, the central bank removed the phrase “ongoing increases” from its statement. Regional bank stocks fell on Wednesday after the Federal Reserve announced a rate hike and Yellen said the Treasury Department was not considering a broad increase in deposit insurance. The S&P Regional Bank ETF (KRE) closed lower on Wednesday. First Republic Bank (FRC) fell nearly 16%, Comerica (CMA) fell 8.5% and Lincoln National Corporation (LNC) fell nearly 8%.
Fed expects only one rate hike this year
“The U.S. banking system is sound and resilient,” the committee said, in its prepared statement. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.” Powell told a news conference that the FOMC had considered pausing rate hikes in light of the banking crisis, but ultimately passed the decision unanimously because of inflationary concerns. Data and the labor market remain strong. “We are committed to restoring price stability and all of the evidence says that the public has confidence that we will do so, that will bring inflation down to 2% over time. It is important that we sustain that confidence with our actions, as well as our words,” Powell said. The increase lifted the benchmark federal funds rate to a target range of 4.75% to 5%. Forecasts released alongside the rate decision showed rates peaking at 5.1%, unchanged from their previous forecast in December, suggesting most officials expect only one more rate hike ahead.
Hong Kong Stock Connect had a net inflow of HK$3.07bn on Wednesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$1.08bn; followed by HSCEI ETF (2828). SMIC (981) recorded the largest net outflow at HK$0.25bn, followed by CCB (939).
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