KGI Asia Commentary
Hang Seng Index fell 15 points on Wednesday
The Hang Seng Index fell 15 points or 0.1% to 21,283 on Wednesday. HSTECH fell 84 points or 1.9% to 4,431 and HSCEI fell 42 points or 0.6% to 7,189. Daily market turnover was HK$115.6bn.
Sentiment in U.S. stocks turned negative on Wednesday
U.S. stocks fell on Wednesday as investors refocused on the latest batch of corporate earnings reports. In addition, Google's decline hit technology stocks, and a series of hawkish comments from Federal Reserve officials also soured the stock market sentiment. The Dow Jones Industrial Average fell 207.68 points, or 0.61%, to 33,949.01. The S&P 500 fell 1.11% to close at 4,117.86. The Nasdaq Composite fell 1.68% to close at 11,910.52.
Shares of Capri Holdings, parent of Michael Kor, plunged 26% on Wednesday. The company's luxury brands, including Jimmy Choo and Versace, have seen revenue declines, dragged down by a slowdown in traffic in China. The company slashed its fiscal 2023 earnings forecast, below Wall Street expectations. Meanwhile, Ebay announced Tuesday that it plans to lay off 500 people, about 4% of its workforce. Chief executive Jamie Iannone said the company made the decision to cut jobs after studying the global macroeconomic environment over the past few months. Shares of Lumen Technologies tumbled nearly 21% after the company posted a fourth-quarter loss of $3.1 billion and issued full-year guidance that fell short of Wall Street expectations. Meanwhile, earnings for CVS and Uber topped Wall Street expectations, and shares of both companies rose.
For the first quarter of 2023, 42 companies in the S&P 500 have issued negative earnings guidance, according to Refinitiv data. Meanwhile, eight have issued positive earnings guidance, while others have not changed guidance or issued any guidance at all in the first place. The percentage of companies with negative expectations was higher than the historical average, Refinitiv reported.
Google AI's wrong answer draws market attention to its accuracy
Bard, Google's touted new AI-powered chatbot tool, has yet to be released to the public, but has already come under fire for giving incorrect answers during a demonstration this week. Alphabet shares then plummeted. In addition, continued remarks from members of the Federal Reserve that stable inflation is still a long way off and that further rate hikes may be required further soured the sentiment for investing in large technology stocks. The Fed's Christopher Waller warned that the “long fight” to contain inflation may require “interest rates higher for longer than some are currently expecting." The comments echoed those of New York Fed President John Williams, who said the central bank "needs to do more" to cool inflation.
Hong Kong Stock Connect had a net outflow of HK$3.63bn on Wednesday, of which Koolearn (1797) had the largest net inflow, reaching HK$0.31bn; followed by WuxiBio (2269). Meituan (3690) recorded the largest net outflow at HK$2.58bn, followed by Kuaishou (1024).
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