KGI Asia Commentary

Hang Seng Index rose 426 points on Friday

The Hang Seng Index opened 131 points higher on Friday, at 18,669 points, and rose 426 points, or 2.3%, to 18,964 points throughout the day; the HSCEI Index rose 158 points, or 2.4%, to 6,719 points; the Hang Seng Technology Index rose 15 points, or 0.4%, to 3,962 points. The total daily turnover of the market was HK$171 billion. Benefiting from rumors that China intends to exempt mainland investors who purchase Hong Kong stocks through Southbound Trading and receive dividends from paying the 20% dividend income tax to the mainland government, the Hong Kong Stock Exchange (388) rose 7.6%; other traditional dividend earners Sector stocks also benefited, with China Construction Bank (939) rising 6.8% and China Shenhua (1088) rising 6.1%.

University of Michigan consumer confidence index softens in initial reading

U.S. stocks closed mixed on Friday, with the Dow Jones Industrial Average rising 125.08 points, or 0.32%, to 39512.84 points; the Nasdaq Index falling 5.40 points, or 0.03%, to 16340.87 points; the S&P 500 Index rising 8.60 points, or 0.16%, reported 5222.68 points. All major stock indexes recorded gains last Wednesday, with the Dow Jones Industrial Average rising 2.16% this week, the Nasdaq Composite Index rising 1.14%, and the S&P 500 Index rising 1.85%.

In terms of economic data, the University of Michigan released the initial value of the consumer confidence index had softened to 67.4, lower than the market expectation of 76 and significantly lower than the previous value of 77.2; at the same time, the one-year and five-year inflation expectations both rose, to 3.5% and 3.1% respectively, from the previous values of 3.2% and 3.0%. As inflation is expected to heat up and with the cooling labor market might suppressing market consumer confidence.

In addition, Federal Reserve officials continue to express that inflationary pressures remain high, suggesting that high interest rates will remain high for a longer period of time. The market will continue to pay attention to earning release and the outlook for Federal Reserve policy.

China’s government bond issuance slows down, social financing now turns negative in April

The National Bureau of Statistics of China released CPI data for April, which rose 0.3% year-on-year, higher than market expectations of 0.1%: core CPI rose 0.1 percentage points from the previous value to 0.7% year-on-year. The prices of consumer goods such as clothing, daily necessities and services have seen relatively good growth. Only housing and transportation and communications have experienced a lower growth rate than core inflation, which is the main suppression item. In terms of social financing for April was announced to be a monthly decrease of approximately Rmb 200 billion , a decrease of Rmb 1.4 trillion year-on-year. Judging from the main issues, the government bonds net issuance has stagnated, with a decrease of nearly Rmb 100 bn, MoM, a year-on-year decrease of nearly Rmb 550 billion, which was the main drag. On the other hand, RMB loans issued to the real economy amounted to Rmb 330 billion, a decrease of Rmb112.5 billion year-on-year, which also reflects the insufficient market demand for loans. In terms of loan sources, the performance of residents was slightly weaker, while the performance of corporate loans was solid.

Hong Kong Stock Connect saw a net inflow of HK$6.5 billion on Friday, of which Bank of China (3988) had the largest inflow, reaching HK$900 million; followed by China Mobile (941). Kuaishou (1024) recorded the largest net outflow of HK$460 million, followed by China National Offshore Oil Corporation (883).