KGI Asia Commentary

2023.08.03 09:00

HSI fell 493 points on Wednesday

The Hang Seng Index fell 493 points or 2.5% to 19,517 on Wednesday. HSTECH fell 149 points or 3.3% to 4,388 and HSCEI fell 185 points or 2.7% to 6,669. Daily market turnover was HK$113.3bn.

Dow falls on U.S. debt downgrade

The Dow fell on Wednesday as an AMD-led tech sell-off and a downgrade of U.S. Treasuries by Fitch Ratings weighed on investor sentiment. The Dow Jones Industrial Average fell 348 points, or 0.1%, the Nasdaq lost 2% and the S&P 500 lost 1.4%. Fitch downgraded the U.S. rating to AA+ from AAA on concerns that the U.S. fiscal situation will deteriorate over the next three years. While the ratings agency's downgrade was largely downplayed, it weighed on investor sentiment. U.S. Treasury Secretary Janet Yellen called the downgrade "flawed," saying it was "based on outdated data." Shares of chipmaker Advanced Micro Devices Inc fell more than 7% after the company reported better-than-expected quarterly results, but second-quarter revenue fell from a year earlier, while guidance for the current quarter fell short of Wall Street expectations. The decline in AMD shares led to sharp falls in other chipmakers including Nvidia Corp and Marvell Technology Group Ltd. Shares of Starbucks rose nearly 1% after reporting second-quarter earnings that topped expectations, but lower-than-expected revenue capped gains. Meanwhile, CVS Health rose nearly 4% after reporting a decline in both revenue and profit.

The labor market unexpectedly rose, private payrolls beat expectations in July

On the job market, private payrolls rose by 324,000 in July, down from 455,000 in June but beating economists' forecast of 189,000. Despite the stronger-than-expected private jobs report, some economists still see a slowdown in the labor market as the Fed's rate hikes so far feed through to the economy.

Hong Kong Stock Connect had a net inflow of HK$0.4bn on Wednesday, of which HSCEI ETF (2828) had the largest net inflow, reaching HK$0.64bn; followed by CSOP HS TECH (3033). XPeng (9868) recorded the largest net outflow at HK$1.67bn, followed by Tencent (700).

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The Group delivered a very strong performance in the first half of 2023 with its best half-year profit since 2015. Underlying profit before tax increased 29% on a constant currency basis to $3.3bn. Income grew 18% on a constant currency basis with a 35% increase in underlying net interest income and a 4% increase in underlying other income. Rising interest rates supported a strong expansion in the net interest margin and Macro Trading within Financial Markets delivered a record half-year performance. The Wealth Management business also showed early signs of recovery. The group has decided to raise its 2023 guidance for income, jaws ratio and return on tangible equity (RoTE), citing a very strong set of results for the first six months of 2023 and confidence in the business outlook. RoTE for the full year is now expected to reach 10%. The group announced a further share buy-back of $1 billion. Target price: $88; Stop- Loss price: $70.

Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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