KGI Asia Commentary

Hang Seng Index fell 212 points on Thursday and Friday

The Hang Seng Index opened 24 points lower, at 17,019 points, and fell 212 points, or 1.2%, to 16,830 points throughout the day; the H-Share Index fell 96 points, or 1.6%, to 5,762 points; the Hang Seng Technology Index fell 69 points, or 1.8%, to 3,831 points. The total daily turnover of the market was HK$ 114.2 bn. In terms of sectors, the DICJ announced Macau gaming revenue of 16.04 billion patacas in November, in line with market expectations of 16 billion patacas. Gaming stocks rallied and performed well, with Sands China (1928) and Galaxy Entertainment (27) rising 2.3% and 1.2% respectively. In addition, Wharf Group (0004) was included in the MSCI Hong Kong Index, and its share price rose 4.4% on Friday.

The U.S. manufacturing index has been in contraction territory for 13 consecutive months, and the employment index has declined for 2 consecutive months.

U.S. stocks closed higher on Friday. The Dow Jones Index rose 295 points, or 0.82%, to 36,245 points; the Nasdaq Index rose 79 points, or 0.55%, to 14,305 points; the S&P 500 Index rose 27 points, or 0.59%, to 4,594 points. All three major U.S. stock indexes posted their fifth consecutive week of gains. The Dow rose 2.42% this week, the S&P 500 rose 0.77%, and the Nasdaq rose 0.38%. U.S. Treasury yields fell after Powell spoke last Friday. The U.S. 10-year Treasury bond yield fell 13.3 basis points to 4.217% on Friday, falling to an intraday low of 4.211%.

The conversation mainly stated that the Federal Reserve will maintain tightening policy, saying that the Federal Open Market Committee will "act cautiously" and that the risks of under-tightening and over-tightening have become more balanced, but it still stated that the Fed is ready to further tighten monetary policy if needed. The market currently believes that the Fed's interest rate hikes may have ended, but officials are still “unwilling” to admit. The market believes that the end of the interest rate hike cycle is one of the reasons that has driven the recent stock market performance. Traders currently expect a 50% chance of the Fed cutting interest rates in March next year, and an 80% chance of a rate cut by May.

In terms of economic data, the U.S. ISM manufacturing index remained at 46.7 in November, lower than the expected 47.8. The employment index fell from 46.8 to 45.8, lower than the expected 47.6. Sales prices rose from 45.1 to 49.9, and new orders also rose from 45.5 to 48.3, exceeding the expected 46.7. The manufacturing index has been in contraction territory for 13 consecutive months, and the employment index has declined for 2 consecutive months, reflecting that the market is cooling down.

Caixin manufacturing PMI rises instead of falling

Caixin Manufacturing PMI, rose to 50.7, an increase of 1.2 percentage points from the previous month, a three-month high and better than market expectations. However, both data reflect that the new orders and ex-factory price index are under contraction territory, which means that market demand is still weak. Official surveys show that more than 60% of companies agree that demand is weak, and this problem is still the primary difficulty that the manufacturing industry needs to face on the road to recovery and development.

Hong Kong Stock Connect saw a net inflow of HK$5.29 billion on Friday, of which Tracker Fund (2800) had the largest inflow, reaching HK$2.08 billion; followed by Meituan (3690). Xiaomi Group (1810) recorded the largest net outflow of HK$460 million, followed by SMIC (981).