KGI Asia Commentary

HSI rose 16 points on Wednesday

The Hang Seng Index rose 16 points or 0.1% to 17,763 on Wednesday. HSTECH fell 12 points or 0.3% to 3,700 and HSCEI fell 9 points or 0.1% to 6,273. Daily market turnover was HK$130.8bn.

U.S. market continue to be volatile on Tuesday and Wednesday

The U.S. Department of Labor announced on Tuesday that the employment cost index, a measure of wages and benefits, rose 1.2% in the first quarter, higher than economists' consensus forecast of 1%. After the data was released, U.S. Treasury yields soared, with the 2-year Treasury yield exceeding 5%. On Tuesday, the S&P 500 index fell 1.57% to close at 5,035.69 points; the Dow Jones Industrial Average fell 570.17 points, or 1.49%, to close at 37,815.92 points. The Nasdaq fell 2.04% to 15,657.82 points. Meanwhile, for the next day, the market is moved by the FOMC result. On Wednesday, the Federal Reserve kept interest rates unchanged but downplayed the possibility of raising interest rates. The Dow Jones Industrial Average rose 87.37 points to close at 37,903.29 points, an increase of 0.23%. The S&P 500 fell 0.34% to close at 5,018.39 points, and the Nasdaq fell 0.33% to close at 15,605.48 points. The Federal Open Market Committee (FOMC) said in a statement that there "has been a lack of further progress toward the Committee's 2 percent inflation objective,". It also said it would start slowing down the pace of reducing its balance sheet next month. The plan, launched in 2022, aims to reduce the assets on the balance sheet. Beginning in June, the Fed will allow about $25 billion in Treasury securities to roll off its balance sheet a month, down from the current monthly pace of $60 billion.

Fed keeps interest rates steady but downplays chances of rate hike amid lack of further progress in disinflation

The Federal Reserve kept interest rates at a target range of 5.25%-5.50%, a move widely expected by the market. At a press conference following the monetary policy statement, Fed Chairman Jerome Powell acknowledged that the recent unexpected rise in inflation data could delay the start of rate cuts, but also ruled out the prospect of resuming rate hikes. "It is unlikely that next policy rate move would be a hike," Powell said, although he acknowledged that progress on inflation has stalled in recent months.

Hong Kong Stock Connect had a net inflow of HK3.2bn on Tuesday, of which BOC (3988) had the largest net inflow, reaching HK$1.06bn; followed by CCB (939). Meituan (3690) recorded the largest net outflow at HK$0.37bn, followed by Li Auto (2015).