KGI Asia Commentary

Hang Seng Index rose 2 points on last Friday

The Hang Seng Index opened 133 points lower, at 17,583 points, and edged up 2 points in last Friday, closed at 17,718 points; the HSCEI Index rose 8 points, or 0.1%, to 6,332 points; the Hang Seng Technology Index fell 34 points, or 0.9%, to 3,554 points. The total daily turnover of the market was HK$98.9 billion. Telecom stocks continued to rally, China Unicom (762) reached a new high, with its share price rose 3.6% to HK$7.17. PetroChina (857) and CNOOC (883) rose 4.3% and 2.9% respectively.

U.S. ISM PMI Underperforms consensus

The U.S. Institute for Supply Management's Purchasing Managers' Index (PMI) for the manufacturing sector declined from April's 48.7 to 48.5, falling short of market expectations of 49.1, and remaining below the 50-point for the third consecutive month, indicating a persistent contraction in manufacturing business activity. From June's perspective, the U.S. consumer goods market demand remains weak, with declining output, as evidenced by the new orders index improving to near contraction levels, rebounding from May's 45.4 points to 49.3 points, signifying a deceleration in the rate of order contraction in June; meanwhile, the backlog of orders index continued its downward trajectory, dropping from 42.4 points to 41.7 points. Timothy R. Fiore, Chair of the ISM Business Survey Committee, noted that production levels are expected to decline month-over-month due to ongoing layoffs in June.

The three major U.S. stock indices all recorded gains yesterday, with the Nasdaq Composite rising 146 points or 0.83% to close at 17,879 points; the S&P 500 rising 14 points or 0.27% to close at 5,475 points; and the DJIA rising 50 points or 0.13% to close at 39,169 points.

China Caixin manufacturing PMI in June continue to improve

In June, China's Caixin PMI slightly increased to 51.8, higher than the previous value of 51.7, reaching its highest level since June 2021. The Caixin number continued to differ from the official figures, with the official PMI remaining flat at 49.5 for the month. The new orders index has stayed in the expansion zone for the 11th consecutive month but had slowed down; new orders continue to flow in, and the backlog of work index has been above the threshold for the fourth consecutive month. The employment index remained in the contraction zone and has dropped to the lowest level since 2019 in the production and business expectations index. Market confidence and demand showed no significant signs of relief. Additionally, the prices of raw materials such as steel, copper, and aluminum have increased, along with rising freight costs, pushing production costs upwards, with the PPI expected to improve in June.

The southbound trading of Hong Kong Stock Connect recorded a net inflow of HK$3.66bn on Friday. China Mobile (0941) had the largest net inflow, amounting to HK$2.22bn, followed by ICBC (1398). On the other hand, the Tracker Fund recorded the largest net outflow of HK$570mn, followed by China Shenhua (1088).