KGI Asia Commentary
Hang Seng Index rose 360 points on Thursday
The Hang Seng Index rose 360 points or 2.1% to 17,832 on Thursday. HSTECH rose 96 points or 2.7% to 3,696 and HSCEI rose 120 points or 1.9% to 6,371. Daily market turnover was HK$100.3bn.
Nasdaq falls despite weak CPI data, Nvidia drops 5.6%
U.S. stocks fell on Thursday despite cooling inflation data that pointed to a slowdown in the U.S. economy and even though the Federal Reserve is unlikely to cut interest rates until later this year. The S&P 500 fell 0.88% to close at 5,584.54 points, retreating from its previous record level. Similarly, the Nasdaq fell 1.92% to close at 18,283.41 points, with Nvidia's stock price falling more than 5.5%. In comparison, the Dow Jones Industrial Average rose slightly by 32.39 points to close at 39,753.75 points, an increase of 0.08%. The Russell 2000 Index, which measures small-cap stocks, rose as much as 3.6%. The rally has been fueled by expectations for a rate cut by the Federal Reserve in September and hopes for a soft landing for the economy supported by the latest inflation data. Delta Air Lines (DAL) shares fell 4% after the airline forecast lower-than-expected profit for the quarter due to discount pressure at the low end of the market. Elsewhere, supermarket chain Costco Wholesale (COST) fell 4.3% despite announcing plans to raise membership fees for the first time since 2017. Crude oil prices fell on Thursday after a downbeat monthly report from the International Energy Agency overshadowed mild U.S. inflation and falling U.S. inventories. The International Energy Agency (IEA) expects global oil demand growth to slow to just below 1 million barrels per day this year and next as China's oil consumption shrank in the second quarter due to economic problems.
Cooling CPI means an interest rate cut is coming
US Consumer price index (CPI) fell 0.1% in June from the previous month, instead of rising 0.1% as expected. The annual growth rate was 3%, lower than the expected growth rate of 3.1%. The widely watched core CPI, which excludes the volatile food and energy components, rose just 0.1% from the previous month and 3.3% from a year ago, compared with the previous estimate of 3.4% growth. U.S. Treasury yields fell after the CPI was released as traders ramped up bets on upcoming interest rate cuts. The CME FedWatch Tool shows the likelihood of a rate cut in September has jumped to around 93%, despite market consensus that the Fed will keep rates on hold at its meeting later this month.
Hong Kong Stock Connect had a net inflow of HK0.47bn on Thursday, of which Meituan (3690) had the largest net inflow, reaching HK$0.29bn; followed by China Mobile (941). Tencent (700) recorded the largest net outflow at HK$0.52bn, followed by XPeng (9868).
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