KGI Asia Commentary

2024.07.09 09:47

Hang Seng Index fell 275 points on Monday

HSI dropped 275 pts or 1.5% to 17,524. HSTI dropped 30 pts or 0.8% to 3,566. HSCEI fell 97 pts or 1.5% to 6,284. Market turnover reached $89.3 billion.

S&P 500 closes at record high

The S&P 500 continued to hit record highs on Monday, closing at all-time highs for a fourth consecutive session, despite cautious market sentiment ahead of Federal Reserve Chairman Jerome Powell's testimony to Congress and the release of key inflation data this week. The S&P 500 rose 0.06% to close at 5,570.73 points, a record high; the Nasdaq rose 0.2% to close at a record high; the Dow Jones Industrial Average fell 31 points, or 0.1%. Elsewhere, Paramount Global shares fell 5% after Skydance Media agreed to merge with the entertainment giant, ending months of speculative hype. Boeing Co shares closed slightly higher after agreeing to plead guilty to a criminal fraud conspiracy charge to resolve the U.S. Department of Justice's investigation into two fatal 737 MAX crashes. The consumer price index (cpi) will be released on Thursday and is expected to increase by 0.1% monthly and 3.1% annually. Core consumer prices are expected to grow 0.2%. Traders see a more than 72% chance of a 25 basis point rate cut in September, up from less than 60% last week. In addition, the focus of the market this week will be the second quarter earnings season. The second-quarter earnings season begins on Friday, with a number of heavyweight banks reporting. Markets will be watching closely to see how corporate profits remain strong amid the pressure of high interest rates and sticky inflation. JPMorgan Chase, Wells Fargo and Citigroup are due to report results on Friday.

Powell set to testify

Powell will testify before Congress on Tuesday and Wednesday, and much of his testimony is expected to focus on monetary policy. Powell signaled last week that while the Fed has made some progress in lowering inflation, policymakers are still not confident enough to begin cutting interest rates. Meanwhile, last week's weaker-than-expected employment data raised hopes that the job market is cooling, giving the Federal Reserve more incentive to start cutting interest rates. But inflation remains a key consideration for the central bank to cut interest rates.

Hong Kong Stock Connect had a net inflow of HK2.17bn on Monday, of which China Mobile (941) had the largest net inflow, reaching HK$0.20bn; followed by CCB (939).HSBC (5) recorded the largest net outflow at HK$0.22bn, followed by HKEX (388).

Recommended Stocks

Capture the moment and trade with KGI Asia's insights

Stocks

Recommended

Stocks

Recommended

SPDR Gold
02840

U.S. non-farm payrolls increased by 206,000 in June. Although higher than market expectations, it was lower than the previous value. At the same time, non-farm employment data for May has revived downward sharply to 218,000 from the previously reported 272,000. The unemployment rate rose to 4.1% compared with market expectations and the previous value. In terms of wage growth, it increased by 3.9% year-on-year and 0.3% month-on-month, both in line with market expectations and slightly lower than the previous value. The overall employment shows a cooling signal, increasing the possibility that the Federal Reserve will start cutting interest rates in the coming months. Gold does not provide income, so the risk-free rate becomes the opportunity cost of holding gold. The price of gold is negatively correlated with real interest rates; historically, when interest rates rise, gold prices fall. The Eurozone has already started cutting rates, and we expect the US to follow suit this year. Falling Treasury yields is likely to support gold prices. Additionally, ongoing global risk events and concerns about the US fiscal situation may enhance gold's role as a safe haven. Moreover, central banks worldwide increasing their gold reserves further boosts demand. Investors bullish on gold may consider allocating to gold ETFs such as SPDR Gold Shares. Target price: $1800.

Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

The materials contained herein are provided by KGI Asia Limited ("KGI") for information only. While such materials are based on or derived from sources believed to be reliable, KGI makes no representation or warranty (express or implied) as to their accuracy or reliability. Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or solicitation of an offer to buy or sell any securities or investments. KGI and its officers, employees, agents and affiliates may have interests in the securities or investments covered herein and accept no liability whatsoever for any loss or consequence whatsoever (whether direct or indirect) resulting from any use of or reliance by you on such materials.