KGI Asia Commentary
Hang Seng Index fell 305 points on Tuesday
The Hang Seng Index fell 305 points or 1.5% to 19,607 on Wednesday. HSTECH fell 103 points or 2.5% to 4,075 and HSCEI fell 121 points or 1.8% to 6,654. Daily market turnover was HK$94.4bn.
The Dow ended lower on Tuesday, dragged down by energy stocks
Investors paused bullish bets on stocks ahead of Federal Reserve Chairman Jerome Powell's testimony before Congress on Wednesday. The Dow Jones Industrial Average fell 0.7%, or 245 points, the Nasdaq lost 0.2%, and the S&P 500 lost 0.5%. Energy stocks were the biggest drag on the broader market. Meanwhile, in tech stocks, chipmaker Intel slumped after it announced tens of billions of dollars in investments in manufacturing plants in Germany and Israel. In other news, Rivian Automotive reached a deal with Tesla to allow its customers to use the latter's charging network through 2024, sending its shares up more than 5%.
U.S. housing starts bring surprise
On the economic front, housing starts rose 21% to 1.6 million units in May, the fastest pace since April 2022, well above expectations for a 0.8% decline to 1.4 million units. Housing activity has long been subdued, so it's reasonable to expect a rebound at some point, but there's reason to be skeptical about this month's surge, as tornado activity has spawned some rebuilding projects in the Midwest.
Markets focus on Fed Chairman Powell's speech
Fed Chairman Jerome Powell's testimony this week will be closely watched for clues on how strongly he has emphasized the need to resume raising rates after pausing last week. While expectations are unlikely to provide new clues on future monetary policy, many expect him and other Fed officials to point out that inflation remains high and reiterate the need to resume raising interest rates.
Hong Kong Stock Connect had a net outflow of HK$2.95bn on Tuesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$1.07bn; followed by HSCEI ETF (2828). Tencent (700) recorded the largest net outflow at HK$1.1bn, followed by Wuxi Bio (2269).
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