KGI Asia Commentary

HSI fell 301 points on Monday

The Hang Seng Index opened 377 points lower and fell 459 points or 2.4% in the mid-day. The decline in the market narrowed afternoon. The HSI closed at 18,773, down 301 points or 1.6%. The HSTECH closed at 4,208, down 64 points or 1.5%. The HSCEI fell 116 points, or 1.8%, to 6,423. Market turnover was HK$104.15bn. Chinese property stocks dropped collectively. Country Garden (2007) suspended trading in 11 domestic bonds. Its share price fell 18.4% today. Similar property management stock Country Garden Services (6098) fell 9.7%. Sino-Ocean (3377) defaulted on unpaid coupons of US$20.94mn, and its stock price fell 5.1%. Domestic insurance stocks Ping An (2318) and China Life (2628) fell 3.1% and 2.8%.

U.S. consumer expectations continue to fall

U.S. consumers are becoming more optimistic about inflation expectations. According to a survey released by the Federal Reserve Bank of New York on Monday, U.S. consumers’ one-year inflation expectations fell from 3.8% to 3.5% in July, the fourth consecutive month of decline, and it has dropped by nearly half from the high of 6.8% in July 2022. Such decline trend has given the Fed a reference to pause interest rate hikes in September. One thing to note is that the drop in inflation expectations to 3.5% is significantly lower than the current 5.37% one-year U.S. Treasury yield. High real interest rates are risks that investors need to pay attention to in the future.

The three major US stock indexes all recorded gains. The Nasdaq composite rose 143 points, or 1.05%, to 13,788; the S&P 500 rose 25 points, or 0.58%, to close at 4,489; the DJIA rose 26 points, or 0.07%, to close at 35,307.

More cities in China lower the down payment ratio for the second house

After several iconic mainland developers have announced debt defaults and recorded huge losses, the market has already worried that the above shocks will completely lose investors' confidence in the property market, and then dragging down the government plan of stabilization of the property market to boost domestic demand. It was reported yesterday that many cities in China, such as Fuzhou, Xiamen and Chengdu, have lowered the minimum down payment ratio for second houses. After the purchase restriction is lifted, the minimum down payment ratio for the first and second house can be further reduced to 20% and 30%, which is expected to promote the transaction volume.

Hong Kong Stock Connect had a net inflow of HK$8.84bn on Monday, among which Tracker Fund (2800) had the largest inflow, reaching HK$1.39bn; followed by Tencent Holdings (0700). Kuaishou (1024) recorded the largest net outflow of HK$178mn; followed by SMIC (0981).