KGI Asia Commentary

HSI fell 378 points on Friday

The Hang Seng Index opened 249 points lower at 17,584 points on Friday. The day's decline further expanded to 378 points, or 2.1%, to 17,454 points. The H-Share Index fell 142 points, or 2.3%, to 5,974 points. The Hang Seng Technology Index fell 69 points or 1.7%, at 3,980 points. The total daily turnover of the market was HK$98 billion. In terms of sectors, mobile phone equipment stocks rallied and rose after their share prices were under pressure on Thursday. Xiaomi (1810) and Sunny Optical (2382) rose 1.5% and 0.7% respectively. Alibaba (9988)'s share price fell by nearly 10% due to news such as pausing its subsidiary IPO plans and reducing shareholdings.

Interest rate futures reflect that the earliest interest rate cut will be in May next year

U.S. stocks closed slightly higher on Friday. The Dow Jones index closed slightly higher by 2 points, or 0.01%, at 34,947 points. The Nasdaq index rose by 11.81 points, or 0.08%, at 14,125 points. The S&P 500 index rose by 6 points or 0.13%, reported at 4514.02 points. All three major U.S. stock indexes recorded gains last week, with the Dow rising 1.94% for the week, the S&P 500 rising 2.24%, and the Nasdaq rising 2.37%. All three major stock indexes posted gains for a third week.

Investors generally revised their forecasts for the Fed's future actions based on last week's U.S. economic data showing better than expected inflation data. Market pricing shows there is only a 0.3% chance of another rate hike in December, compared with about 15% a week ago. According to the FedWatch tool, the Fed is likely to begin easing monetary policy as early as May next year. The probability is 47.8%. The U.S. 10-year bond interest rate is currently at 4.44%, and the foreign exchange market is volatile, with the U.S. dollar index falling below 104.

Saudi Arabia may extend oil production cuts

Although U.S. inflation data continues to fall, energy prices have started to gain market concern. After a round of decline in oil prices, the market is swaying over whether OPEC will extend the production cuts, leading to sharp fluctuations in oil prices. Although the U.S. Energy Information Administration has significantly lowered its crude oil demand forecast, which is in line with the performance of the oil market recently. However, Saudi Arabia has denied the finding from EIA, The Saudi Energy Minister emphasized that according to their observations, “oil demand is strong”. According to market analysis, Saudi Arabia may extend its production reduction plan until the spring of next year. The next OPEC+ meeting will be held on November 26.

The net inflow of Hong Kong Stock Connect on Friday was HK$3.74 billion, of which Tencent (700) had the largest inflow, reaching HK$937 million; followed by Meituan (3690). Anta Sports (2020) recorded the largest net outflow of HK$159 million; followed by Xiaomi Group (1810).