KGI Asia Commentary

Hang Seng Index fell 483 points on Wednesday

The Hang Seng Index fell 483 points or 2.4% to 20,051 on Wednesday. HSTECH fell 133 points or 3.2% to 3,989 and HSCEI fell 185 points or 2.7% to 6,727. Daily market turnover was HK$117.4bn.

Dow ends lower on Wednesday as concerns persist about Fed accelerating tightening cycle

The Dow ended lower on Wednesday, as concerns persisted that the Fed would raise interest rates again sharply, data showed that the labor market remained tight, and non-farm payroll data will be released on Friday. U.S. Treasury yields continued to rise again, with the 2-year U.S. Treasury yield rising to nearly 5.1%, the highest level since 2007. The Dow Jones Industrial Average fell 58.06 points, or 0.18%, to 32,798.40; the S&P 500 rose 0.14% to 3,992.01. The Nasdaq Composite rose 0.4% to close at 11,576.00. Energy was one of the main factors weighing on the market, with oil prices falling amid concerns over the impact of Fed rate hikes on the economy and energy demand. Technology stocks rose as semiconductor stocks led gains, with Advanced Micro Devices up nearly 4 percent. Meanwhile, shares of cybersecurity company Crowdstrike Holdings rose more than 3% after the company reported better-than-expected quarterly results.

Private payrolls being higher than expected

Data showing job openings fell less than expected in January and private payrolls rose more than economists expected in February further fueled bets the Fed will be forced to accelerate the pace of rate hikes at its March meeting.

ADP reported Wednesday that private sector payrolls rose by 242,000 in February, up from 119,000 in January and above expectations for a gain of 205,000. Employment growth was led by leisure and hospitality, which added 83,000 jobs. Financial activity rose by 62,000, while manufacturing rose by 43,000. Two days after the release of the ADP report, the government will release non-farm payrolls, which are expected to rise by 225,000.

“There is a tradeoff in the labor market right now,” said ADP’s chief economist, Nela Richardson. “We’re seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term.”

Meanwhile, the Labor Department's JOLTS report showed 10.824 million job vacancies in January, down about 410,000 from December but still slightly above the number of available workers. Powell told the Senate Banking Committee on Wednesday that the JOLTS report is a key data point he will review before making an interest rate decision at the March 21-22 policy meeting.

Hong Kong Stock Connect had a net inflow of HK$7.55bn on Wednesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$3.34bn; followed by Tencent (700). HKEX (388) recorded the largest net outflow at HK$45mn, followed by Wuxi Bio (2269).