KGI Asia Commentary

HSI rose 345 points on Thursday

China stepped in to the market. Huijin increased its holdings in the four major Chinese banks on the SSE yesterday. The Hang Seng Index opened 365 points higher opening at 18,258 points, and closed at 18,238 points yesterday, up 345 points or 1.9%. The Hang Seng Technology Index reported at 4,019 points, up 66 points or 1.7%. The H-Share Enterprise Index rose 134 points, or 2.2%, to 6,267 points. The market turnover was HK$101.1 bn. In response to Huijin's increase in its holdings of A-share Chinese banks, the share prices of the four major banks rose between 4% and 6% yesterday. In addition, consumer stocks continued to rebound yesterday, with Li Ning (2331) and Mengniu Dairy (2319) rising 4.3% and 5% respectively.

U.S. stocks and bonds under pressure after September CPI data released

After the United States released the latest CPI data for September, U.S. stock indexes closed lower. The Dow Jones closed down 174 points, or 0.51%, at 33,631 points. The Nasdaq fell 85 points, or 0.63%, to 13,574 points. The S&P 500 fell 27 points, or 0.62%, to 4,349 points . In the bond market, after the CPI data was released, U.S. bond yields rose. On Thursday, the U.S. 10-year Treasury bond yield rose above 4.7%, rising by about 13 basis points to 4.728% during the trading hours.

The U.S. Bureau of Labor Statistics reported on Thursday that the U.S. consumer price index (CPI) rose 0.4% in September from August. The core CPI index, which excludes food and energy costs, rose 0.3% month-on-month. The U.S. CPI increased by 3.7% year-on-year in September, which was higher than the expected value of 3.6%, and the previous value was 3.7%; the core CPI in September increased by 4.1% year-on-year, the lowest growth rate since 2021, and was in line with expectations, and the previous value was 4.3%. This data shows that although U.S. inflation has dropped a lot from its high point, it is still far from the 2% target level, which may prompt the Federal Reserve to maintain high interest rates for a longer period of time.

The last rate hike this year may occur in December

The U.S. CPI data once again reflected that core inflation developed as expected by the market, but headline inflation was still affected by oil price fluctuations. The month-on-month increase was 0.1 percentage points faster than market expectations to 0.4%, and the month-on-month increase in August was 0.6%. Year-on-year overall inflation was also slightly higher than market expectations of 3.6%, slightly higher by 0.1 percentage points to 3.7%. Headline inflation is affected by oil price fluctuations, and economists believe that the core indicator is a better reflection of underlying inflation than the headline CPI. There are also voices pointing out that given the recent surge in bond yields, some officials have said this may replace more tightening policies. But at least it supports policymakers' desire to keep borrowing costs high for some time. According to the CME Group's "Fed Watch" tool, the last interest rate hike this year may occur in December, and the probability of an interest rate hike has increased from 26.3% before the CPI announcement to 31.6%.

There was a net outflow of HK$5.48 bn on Southbound Trading on Thursday. Among them, WuXi Biologics (2269) had the largest inflow, reaching HK$350 million; followed by the Hong Kong Stock Exchange (388). Tracker Fund (2800) recorded the largest net outflow of HK$2.7 bn; followed by China Construction Bank (939).