KGI Asia Commentary

Hang Seng Index fell 142 points on Wednesday

The Hang Seng Index fell 142 points or 0.85% to 16,646 on Wednesday. HSTECH fell 68 points or 1.8% to 3,646 and HSCEI fell 43 points or 0.8% to 5,628. Daily market turnover was HK$79.27bn.

Wall Street records second-lowest close as profit-taking begins in 2024

The Nasdaq had its worst single-day performance in nearly three months on Wednesday, falling 1.18% to close at 14,592.21 points, falling for the fourth consecutive day. The S&P 500 fell 0.80% to close at 4,704.81 points. The Dow Jones Industrial Average fell 284.85 points, or 0.76%, to close at 37,430.19 points. Airline stocks came under pressure as oil prices soared following disruptions at Libya's largest oil field, raising concerns about fuel costs. The S&P Passenger Airline Index fell 4%. Higher crude oil prices supported the energy index, which rose 1.5%, the biggest gain among the S&P's few sectors. Financials fell 0.8%, with Charles Schwab (SCHW) and Blackstone (BX) among the sectors pulling the index lower. Shares of the two companies fell 3% and 4.6% respectively after Goldman Sachs downgraded their stock ratings from "buy" to "neutral." However, Citigroup rose for a second day in a row, rising 1.1% to reach its highest closing level since mid-August 2022, as the bank continued to benefit from an increase in its price target and an upbeat analyst note from Wells Fargo the day before. Investors appear to be selling off last year's tech winners, which surged last year on expectations of easing monetary policy in 2024. But investors appear to be tempering their enthusiasm amid uncertainty over when the Fed will eventually begin cutting interest rates.

Minutes of the meeting showed that Fed officials believed a rate cut was possible in December, but the path was highly uncertain.

Minutes of the meeting released on Wednesday showed that Fed officials concluded in December that a rate cut was likely in 2024, although they did not appear to disclose the specific timing of the rate cut.“In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves,” the minutes said. At the same time, the minutes noted an “unusually elevated degree of uncertainty” about the policy path. Several members said it may be necessary to keep the funds rate at a higher level if inflation does not cooperate, while others noted that further rate hikes were possible depending on how the situation develops.

Hong Kong Stock Connect had a net inflow of HK$6.8bn on Thursday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$4.2bn; followed by HSCEI ETF (2828). GreatWall (2333) recorded the largest net outflow at HK$0.17bn, followed by SMIC (981).