KGI Asia Commentary

Hang Seng Index rose 175 points on Thursday

The Hang Seng Index rose 175 points or 0.8% to 20,987 on Thursday. HSTECH rose 78 points or 1.8% to 4,367 and HSCEI rose 71 points or 1.0% to 7,089. Daily market turnover was HK$122.9bn.

Dow closes down 431 points as PPI exceeds expectations

The Dow ended lower on Thursday as data showing underlying inflationary pressures and a tight labor market raised concerns about the Fed's path of rate hikes, while some Fed members said a return to more aggressive hikes was not off table. The Dow Jones Industrial Average fell 431.20 points, or 1.26%, to 33,696.85. The S&P 500 Index fell 1.38% to close at 4,090.41 points, and the Nasdaq Composite Index fell 1.78% to close at 11,855.83 points. PPI posted its biggest monthly increase since June, while initial jobless claims unexpectedly fell, pointing to a tight labor market and suggesting the Fed still has more work to do to keep demand down. After the data, James Bullard, president of the Federal Reserve Bank of St. Louis, said it is possible that the Fed would resume more aggressive rate hikes. U.S. Treasury yields surged on the comments, sending market growth stocks lower, including hardest-hit consumer discretionary and technology. Electric carmaker Tesla is recalling 362,000 electric vehicles with "Full Self-Driving" software that could cause the vehicles to Unsafe Behavior Near Intersections" . News of the recall offset earlier positive news that Tesla had sold out of its Model Y electric car in the U.S. this quarter as recent price cuts spurred demand. Share price of Tesla fell more than 5%. On the earnings front, Roku stood out, with shares up more than 16% after the streaming device maker reported upbeat guidance and a smaller-than-expected fourth-quarter loss. Twilio was also a big winner, with shares up 17% after the communications company issued strong guidance and beat Wall Street expectations for fourth-quarter revenue. Cisco Systems reported better-than-expected second-quarter results, boosted by improved supply and strong demand. Its shares rose more than 5%.

Numbers of US data released

PPI rose 0.7% in January, stronger than the +0.4% expected. The annual price growth rate slowed to 6.0% from 6.5%, below expectations of 5.4%. The core PPI, which excludes food and energy, rose 0.5%, compared with expectations for a 0.3% rise. The number of initial jobless claims in the United States fell by 1,000 to 194,000 in the week ended February 11, 200,000 less than expected.

Fed's Bullard urges more rate hikes to ensure cooling inflation persists

" I wouldn't rule anything out for that meeting or any meeting in the future," St. Louis Fed President James Bullard said Thursday after a speech at the Greater Jackson Chamber of Commerce in Jackson, Tennessee, pointing to the possibility of a 50 percent hike in March. Bullard also said that he would like to see the Fed get its benchmark rate to a range of 5.25%- 5.5% and get there “as soon as you can.”

Hong Kong Stock Connect had a net outflow of HK$0.86bn on Thursday, of which China Mobile (941) had the largest net inflow, reaching HK$0.34bn; followed by China Telecom (728). Tencent (700) recorded the largest net outflow at HK$0.59bn, followed by Wuxi Bio (2269).