KGI Asia Commentary

Hang Seng Index fell 28 points on Monday

The Hang Seng Index closed at 16,216 yesterday, down 28 points or 0.2%; the HSTECH was at 3,404, down 66 points or 1.9%; the HSCEI fell 35 points or 0.6 %, closed at 5,446. The market turnover was HK$71.1bn. There is news that Baidu's and iFlytek’s LLM have been used for military purposes. Although Baidu (9888) declined any cooperation or affiliation with the military, its stock price still fell 11.5%. China real estate stock Logan (3380) reached an agreement with the creditor group, and the stock rose 5.0% after resuming trading.

ECB officials expected rate cut won't happen too soon

Two ECB officials yesterday cooled down market expectations for an interest rate cut. Bundesbank President Nagel, one of the committee members, said in an interview that the current inflation in the euro zone is still too high. The market is currently over-optimistic about the rate cut timetable. Interest rate cuts will not be considered until the third quarter. However, it is not unreasonable for the market to predict that the Eurozone will cut interest rates in the middle of this year, as the economy in the region is relatively weak. Germany, as an example, the IMF predicts that economic growth will rebound to 0.6% this year, but this still makes it the weakest in the world.

Yesterday was the Martin Luther King Day holiday in the U.S., and the stock market was closed for the day.

IMF said Chinese economic growth may fall to 4%

IMF believed that China needed to carry out structural reforms as soon as possible to avoid a sharp decline in economic growth. President Kristalina Georgieva said at the World Economic Forum in Davos that the key is to restore private sector’s confidence in the economic outlook, which can help to reduce excessive savings. She also suggested that if reforms are not carried out, the worst-case scenario is that 2024 economic growth will be only 4%, which is far from the previous year's expectation of 5% to 5.4%. In November, the IMF still expected that economic growth would slow down by 4.6% this year due to the continued housing problems in China, reflecting the IMF's more bearish outlook on the Chinese economy.

Hong Kong Stock Connect had a net inflow of HK$4.23bn on Monday. Among them, Tracker Fund (2800) had the largest inflow, reaching HK$2.47bn; followed by Hang Seng China Enterprises (2828). XPEV (9868) recorded the largest net outflow of HK$360mn; followed by Tencent (0700).