KGI Asia Commentary

HSI fell 434 points on Friday

Hong Kong stocks opened 65 points lower on Friday following the decline of U.S. stocks, and opened at 21,559 points. The decline further expanded and closed at 21,190 point, down 434 points. The China Enterprises Index fell 188 points or 2.56% to 7,126 point; the Hang Seng Technology Index fell 209 points or 4.6% to 4,362 point. The market turnover was HK$119.8 bn. Standard Chartered (2888) clarified and denied that First Abu Dhabi Bank is considering bidding for the stock price, and the share price increase narrowed to 4.2%. SMIC (981) announced its fourth-quarter results, and its stock price fell 4.3% to HK$17.24.

Consumer Confidence Index Up, Short-term and Long-term Inflation Expectations Are Uncertain

The initial value of the University of Michigan's consumer confidence index released on Friday rose from 64.9 in January to 66.4 in February, higher than market expectations of 65 and the final value of 64.9 in January. The university said that the recovery in confidence was partly driven by the rebound in the stock market Influenced by the financial optimism of stockholders. On the other hand, inflation expectations rose to 4.2% from 3.9% last month, higher than the expected 4%, but long-term inflation expectations remained at 2.9%. Consumers continue to express considerable uncertainty about long-term and short-term inflation expectations, suggesting that any decline in inflation expectations could be temporary.

Philadelphia Fed President Patrick Harker said the Fed is increasingly likely to rein in inflation without triggering a recession, but key interest rates must rise above 5% and stay there for sometime, to ensure that upward pressure on prices eases. The performance of US stocks was mixed. The Dow rose 169 points or 0.5% to 33,869 point, the S&P rose 9 points or 0.22% to 4,090 point, and the worst performer was the Nasdaq fell 71 points or 0.61% to 11,718 point.

Link Announces "Five for One" Rights Issue

Link REIT (823) announced the first five-for-one rights issue since its 17 years listing record, and the subscription price for each rights issue fund unit was HK$44.2, a discount of 29.6% compared to Thursday's closing price. About half of the funds will be used to repay debt and the rest will be used for investments and general operating expenses. The CEO of Link REIT admitted that there will be a short-term impact on the dividend payout, such as resulting in a dilutive effect, but hopes to bring better long-term returns. In addition, the net gearing ratio is expected to fall below 20% after capital is used to repay debt.

Hong Kong Stock Connect had a net inflow of HK$3.224 bn on Friday, among which Hang Seng China Enterprises (2828) had the largest net inflow of HK$1.19 bn; followed by Tracker Fund (2800). Meituan (3690) recorded the largest net outflow of HK$710 mn, followed by BYD (1211).