KGI Asia Commentary

HSI fell 192 point on Tuesday

The Hang Seng Index fell 192 points or 1.0% to 18,581 on Tuesday. HSTECH fell 29 points or 0.7% to 4,179 and HSCEI fell 57 points or 0.9% to 6,366. Daily market turnover was HK$81.9bn.

Dow slides more than 300 points, as banking sector tumble

The Dow Jones Industrial Average fell 361.24 points, or 1.02%, to end at 34,946.39, snapping a three-day winning streak. The S&P 500 fell 1.16% to close at 4,437.86. The Nasdaq Composite fell 1.14% to 13,631.05. U.S. financial stocks fell on Tuesday as Fitch warned it may have to downgrade the credit ratings of dozens of banks, including JPMorgan. Last week, Moody's downgraded 10 U.S. banks while putting other large institutions on watch for possible downgrades. Global investor sentiment also weakened after China released disappointing economic data and the People's Bank of China unexpectedly cut interest rates. China's July industrial output rose 3.7% year-on-year, worse than expected. Retail sales growth also came in below expectations, and the People's Bank of China cut interest rates by 15 basis points to 2.5% from 2.65%. But that failed to assuage investors' concerns, and instead heightened concern about China's struggling real estate market. On the data front, U.S. retail sales in July came in above expectations, pointing to a stronger-than-expected consumer performance. Retail sales increased by 0.7% month-on-month, which was expected to increase by 0.4%.

Fitch warns of possible rating downgrade for dozens of banks

Fitch Ratings analyst Chris Wolfe told CNBC on Tuesday that Fitch could be forced to downgrade a number of U.S. banks, including JPMorgan, if the health of the banking sector deteriorates further. The ratings agency downgraded its assessment of the health of the banking sector in June, a move that analyst Chris Wolfe said went largely unnoticed because it did not trigger a downgrade of the bank. Wolfe told CNBC that another downgrade to A+ from AA- would force the agency to reassess the ratings of the more than 70 U.S. banks it covers.“If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions,” Wolfe said.

Hong Kong Stock Connect had a net inflow of HK$6.7bn on Tuesday, of which Tencent (2800) had the largest net inflow, reaching HK$0.70bn; followed by China Mobile (941). CNOOC (883) recorded the largest net outflow at HK$0.22bn, followed by Kuaishou (1024).