KGI Asia Commentary

HSI rose 117 points on Tuesday

The Hang Seng Index rose 117 points or 0.6% to 19,521 on Tuesday. HSTECH rose 93 points or 2.4% to 4,038 and HSCEI rose 32 points or 0.5% to 6,618. Daily market turnover was HK$99.8bn.

Wall Street rises after inflation report

The S&P 500 closed higher again on Tuesday as data showed inflation slowed to a more than one-year low, boosting expectations that the Federal Reserve will pause interest rate hikes ahead of a two-day meeting. The S&P 500 rose 0.7%, hitting another 52-week high; the Dow Jones Industrial Average rose 0.4%, or 145 points; and the Nasdaq Composite rose 0.8%. The consumer price index (CPI) rose just 0.1% for the month, bringing the full-year level down to 4% from 4.9% in April. Bets on the Fed pausing rate hikes were priced in almost 95% of markets after the data, compared with about 81% a day earlier. However, the probability that the Fed will resume raising interest rates in July also rose to 60% from 50% a day earlier. Materials stocks led gains, driven by higher prices for commodities including metals, after China cut short-term interest rates to boost the post-epidemic recovery, increasing optimism about demand. Freeport-McMoran Copper & Gold Inc, Steel Dynamics Inc, and Albemarle Corp were among the biggest gainers up more than 4%. Energy stocks also performed well. Technology stocks, which led the broader market, also rose, although weakness in Apple Inc capped gains. Meanwhile, Oracle reported quarterly results that topped Wall Street expectations on both revenue and profit, buoyed by a strong performance in its cloud business, and the company talked up artificial intelligence-driven demand.

Inflation was 4% in May, the lowest level in two years

The consumer price index (CPI) rose just 0.1% for the month and 4% year-on-year, the lowest level in about two years. After deducting food and energy, the core CPI rose 0.4% and 5.3%, respectively. All figures were in line with consensus expectations. After the data, the market priced in a nearly 100% chance that the Fed would not raise interest rates this week. Falling energy prices helped curb CPI gains for the month. Food prices rose only slightly. However, a 0.6% increase in shelter prices was the biggest factor driving the overall CPI increase. The Consumer Price Index (CPI) report showed a growing discrepancy between core and headline figures.

Hong Kong Stock Connect had a net outflow of HK$3.1bn on Tuesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$4.14bn; followed by PetroChina (857). Meituan (3690) recorded the largest net outflow at HK$0.48bn, followed by China Mobile (941).