KGI Asia Commentary

HSI fell 328 points on Monday

The Hang Seng Index opened 10 points lower and fell 224 points in mid-day. It continued to fall in the afternoon and closed at a low of 17,729 points today, down 328 points or 1.8%; the HSCEI fell 132 points or 2.1% to close at 6,130; the HSTECH fell 108 or 2.7% to close at 3,882. The total daily turnover of the market dropped to HK$74.3bn. Evergrande (3333) canceled the arrangement meeting to re-examine the terms of debt restructuring. Evergrande's share price fell 21.8%, while its related companies Evergrande Automobile (0708) and Evergrande Property (6666) also fell 22.2% and 14.1% respectively. The share prices of other mainland property stocks fell between 4% and 14% today. In terms of electric vehicle stocks, Geely (0175)'s ZEEKR targeted to launch seven more models in Europe in 2025. Geely's stock price fell 2.2% today.

U.S. government shutdown risk re-heated again

The U.S. government shutdown in early May was able to catch up with the debt ceiling increase before the "X-Date", but now there may be a chance of another government shutdown. Currently, the U.S. House of Representatives and the Senate need to pass at least 12 bills before the end of the short-term spending bill at the end of September to avoid the suspension of federal government daily operations. However, some Republican said they wanted the Democratic Party to make concessions on spending. The credit rating agency Moody's has stated that if the U.S. government is shut down again, it will weaken the government's governance and bring a negative impact on the credit rating of the United States.

All three major U.S. stock indexes recorded gains last night, with the Nasdaq composite rising 59 points or 0.45% to close at 13,271; the S&P 500 rising 17 points or 0.4% to close at 4,337; DJIA rising 43 points or 0.13% to close at 34,006.

The "Higher for longer" interest rate policy may become the focus in next year

As the Fed's interest rate dot plot showed that the majority of members supported the need for one more interest rate hikes this year and that next year's interest rate cut would be significantly lower than expected, the market believed that the Fed's determination to "Higher for longer" was very clear. Yesterday, Chicago Federal Bank President Austan Goolsbee said that inflation continuing to exceed the 2% target remained a greater risk, and that the current stage should not be a discussion of another interest rate hike, but how long did such a high level of interest rate maintain. Therefore, the market was now reflecting the interest rate policy from the Fed. The 10-year U.S. bond yield once exceeded 4.53%, close to the high in 2007.

Hong Kong Stock Connect saw a net inflow of HK$6.03bn on Monday, of which Tracker Fund (2800) had the largest inflow, reaching HK$1.67bn; followed by Hang Seng China Enterprises (2828). China Mobile (0941) recorded the largest net outflow of HK$530mn; followed by CNOOC (0883).