KGI Asia Commentary
Hang Seng Index fell 24 points on Thursday
The Hang Seng Index fell 24 points or 0.1% to 18,928 on Thursday. HSTECH fell 51 points or 1.2% to 4,063 and HSCEI fell 17 points or 0.3% to 6,364. Daily market turnover was HK$104.8bn.
Dow up more than 100 points, but Nasdaq down 2%
The Dow rose for a ninth straight day on Thursday after Johnson & Johnson reported better-than-expected earnings. But Netflix and Tesla fell after their earnings reports, hurting the broader market. The Dow Jones index rose 163.97 points to close at 35225.18 points, an increase of 0.47%. The index is less dependent on technology stocks. The S&P 500 fell 0.68% to 4,534.87. The Nasdaq Composite fell 2.05% to close at 14,063.31. Shares of Dow component Johnson & Johnson rose 6% after the company raised its full-year outlook and reported quarterly results that topped Wall Street expectations. Travelers, another Dow component insurer, beat analysts' forecasts for quarterly revenue, boosting the stock. But results were mixed, dragging down the S&P 500 and Nasdaq. Shares of streaming giant Netflix fell more than 8% after the company reported revenue that fell short of analysts' expectations. Meanwhile, Tesla shares fell 9.7%. Tesla reported second-quarter results that topped Wall Street expectations, but Chief Executive Elon Musk said the electric carmaker would be willing to cut prices again if the economic backdrop deteriorated, reigniting concerns about falling profit margins. Of the S&P 500 companies that have reported results so far, 74% have topped expectations, according to FactSet. Strong corporate earnings have fueled optimism about a soft landing for the economy.
Labor market remains tight
Initial jobless claims unexpectedly fell 9,000 to 228,000 in the week ending July 15, the lowest since May. The FOMC meeting will be held next week. There are signs that the labor market remains tight, which could threaten wage inflation. However, the Fed is widely expected to raise interest rates by 0.25% on July 26.
AAII Sentiment Survey showing optimism above average for seventh consecutive week
Optimism increased and reached an unusually high level in the latest AAII Sentiment Survey. Neutral sentiment and bullish sentiment both decreased. Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 10.4 percentage points to 51.4%. This marks the seventh consecutive week that bullish sentiment is above its historical average of 37.5%.
Hong Kong Stock Connect had a net outflow of HK$13.8bn on Friday, of which Tencent (700) had the largest net inflow, reaching HK$0.31bn; followed by China Mobile (941). Tracker Fund (2800) recorded the largest net outflow at HK$9.2bn, followed by HSCEI (2828).
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.
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