KGI Asia Commentary

HSI fell 327 points on Monday

The Hang Seng Index opened 153 points lower today at 17,798 points. The day-to-day decline extended to 327 points, or 1.8%, to 17,623 points. The China Enterprises Index fell 116 points, or 1.9%, to 6,030 points. The Hang Seng Technology Index fell 84 points, or 2.1% at 3,923 point. The market turnover was HK$ 108.5 bn. The chairman of Hongjiu Fruit (6689) extended the lock-up period for 12 months, and the share price rose 8% to HK$6.82.

Markets Await Powell's Jackson Hole Speech

There was no important economic data released in the U.S. yesterday. The market is focusing on this week’s Fed Chairman Powell’s annual meeting and speech in Jackson Hole. From the perspective of the Fed fund rate futures, the market still believes that there is a high chance of suspending the rate hike in September to maintain it at 5.25% to 2.5%. The main reason why the core inflation is still stubborn is related to rent and housing prices. Since the annual growth rate of new home sales in the U.S. has bottomed out at the beginning of the year, the rationale for rates cut has further diminished.

The three major U.S. stock indexes developed differently. Among them, the Nasdaq Composite performed the best, rising 206 points or 1.56% to close at 13,497; the S&P 500 rose 30 points or 0.69% to close at 4,399; while the DJIA fell 36 points or 0.11%, closing at 34,463.

The LPR cut level in China was worse than expected

The People's Bank of China lowered 1-year LPR yesterday by 0.1 percentage points to 3.45%, and the 5-year LPR remained unchanged at 4.2%. Although the rate cut was the second since June, it was less than the People's Bank of China cut its one-year medium-term lending facility (MLF) by 0.15 percentage point to 2.5% last week. Prime loan rates are set by a group of banks and show the business loan and mortgage rates they offer to borrowers. The lower-than-expected decline in LPR reflects that the central government’s call for commercial banks to cut interest rates has not had much effect. On the contrary, with the recent default of Zhongrong Trust, many domestic banks have also become conservative.

Hong Kong Stock Connect had a net inflow of HK$9.57bn on Monday, among which Tracker Fund (2800) had the largest inflow, reaching HK$3.02bn; followed by South Hang Seng Technology (3033). Kuaishou (1024) recorded the largest net outflow of HK$144mn; followed by Meituan (3690).