KGI Asia Commentary

Hang Seng Index fell 310 points on Monday

The Hang Seng Index opened 46 points higher and the decline intensified. The HSI fell 310 points, or 1.9%, to close at 16,224 today; the HSCEI fell 126 points, or 2.3%, to close at 5,480; the HSTECH fell 107 points, or 3%, to close at 3,484. The total daily turnover of the market was HK$84.44bn. Chinese technology stocks generally fell today, with losses ranging from 1.8% to 5.2%. The market continues to pay attention to the "involution" problem in the Chinese auto market, and auto stocks continue to weaken. The share price of new energy vehicles XPEV (9868) fell 7.8% today, while BYD (1211) fell 1.6%.

Fed member reiterated twice rates cut in this year

Atlanta Fed President Raphael Bostic said on Monday that the Fed will only cut interest rates twice this year, and the first cut will only be in the third quarter. Bostic is a voting member of this year's FOMC meeting, and the announcement came after last week's strong non-farm payrolls report. Meanwhile, he pointed out in his speech that in reference to the six-month inflation trend, inflation is very close to the 2% target. At that time, personal consumption expenditures (PCE) in November had an annualized rate of 1.9% in the past six months, which was below the Federal Reserve's inflation target.

All three major U.S. stock indexes recorded gains. The Nasdaq composite rose 319 points, or 2.2%, to close at 14,843; the S&P 500 rose 66 points, or 1.41%, to 4,763; the DJIA rose 216 points, or 0.58%, to close at 37,683.

One-year inflation expectations fall to new 2021 low

According to statistics from the Federal Bank of New York, the median one-year inflation expectation fell to 3% in December, falling for the third consecutive month; the previous value was 3.4%, and a new low since January 2021. Respondents' expectations for food and rent increases fell in December, while energy prices increased modestly. The current level of inflation has fallen very close to the 2% to 3% range over the past two decades. This has helped guide Federal Reserve officials to support rates cut. Fed officials have also generally believed that inflation Expectations have a strong impact on actual price pressures.

Hong Kong Stock Connect had a net outflow of HK$1.43bn on Monday, of which CNOOC (883) had the largest inflow, reaching HK$523mn; followed by China Telecom (0728). Tencent (0700) recorded the largest net outflow of HK$638mn, followed by SMIC (0981).