KGI Asia Commentary

Hang Seng Index rose 100 points on Thursday

The Hang Seng Index rose 100 points or 0.5% to 21,678 on Thursday. HSTECH rose 24 points or 0.5% to 4,524 and HSCEI rose 26 points or 0.4% to 7,340. Daily market turnover was HK$127.8bn.

Dow plummets more than 600 points as economic data point to increased chances of recession

The Dow Jones Industrial Average fell 613.89 points, or 1.81%, to 33,296.96 on Wednesday as weaker-than-expected December retail sales data stoked recession fears. The S&P 500 fell 1.56% to close at 3,928.86, its lowest level since Dec. 15. The Nasdaq Composite fell 1.24% to close at 10,957.01, snapping a seven-day winning streak. Shares in JPMorgan, Bank of America and Wells Fargo fell as the 10-year U.S. Treasury yield fell to its lowest level since September. Also, Microsoft's plan to lay off around 10,000 employees hurt investor sentiment. Shares of Moderna, Inc. (MRNA) rose 3.3% after the vaccine maker said it successfully tested older adults in a trial of an experimental vaccine against RSV, a contagious respiratory virus. Shares of Charles Schwab Corp. (SCHW) fell 2.5% after fourth-quarter earnings missed expectations.

Data show economic slowdown

The Federal Reserve's beige book, a periodic report on the state of the economy, said sales prices rose at a moderate pace in most districts, though the rate of increase slowed. Overall economic activity remained relatively steady, with respondents overall expecting slower growth in the months ahead.

The U.S. producer price index (PPI) rose 6.2% year-on-year in December, lower than market expectations of 6.8%, mainly due to falling energy and food prices; December PPI fell 0.5% month-on-month, a drop greater than the expected 0.1%. The core PPI excluding food and energy rose 5.5% year-on-year, lower than market expectations of 5.6%; the monthly increase was 0.1%, in line with expectations.

Retail sales fell for the second straight month last month, the biggest decline in a year, as consumers cut spending on cars, department stores, furniture and dining out, pointing to weak consumer spending and overall economic growth late last year. Retail sales fell by 1.1% month-on-month in December, the largest decline in a year, worse than the expected 0.9%, and the previous month's decline was revised down to 1%; sales excluding cars and gasoline fell by 0.7% during the same period.

Hong Kong Stock Connect had a net inflow of HK$1.12 bn on Wednesday, of which Meituan (3690) had the largest net inflow, reaching HK$0.61bn; followed by Koolearn (1797). Tracker Fund (2800) recorded the largest net outflow at HK$1.81bn, followed by HSCEI ETF (2828).