KGI Asia Commentary

HSI fell 111 points on Wednesday

The Hang Seng Index fell 111 points or 0.6% to 17,885 on Wednesday. HSTECH fell 62 points or 1.6% to 3,921 and HSCEI fell 53 points or 0.9% to 6,181. Daily market turnover was HK$71.2bn.

Stocks fall as Fed signals rate hikes aren't over yet

Stocks retreated on Wednesday after the Federal Reserve said it would keep interest rates steady but signaled it would raise them again. The Dow Jones Industrial Average fell 0.2%, 76 points, the Nasdaq fell 1.5% and the S&P 500 fell 0.9%. The U.S. 2-year Treasury yield jumped to its highest level since July 2006, and the 10-year Treasury yield hit a high not seen since November 2007. The measures have raised concerns about the impact of rising interest rates and could weigh on technology stocks. Technology stocks were dragged down, with information technology and communications services the two worst-performing sectors in the S&P 500.

The Fed won’t raise interest rates, but is leaning toward higher-for-longer

As widely expected, the Fed kept interest rates on hold. However, the central bank said in its economic forecast that it expected to raise interest rates once more before the end of this year. The central bank has signaled that it will end its rate hikes and start cutting rates next year - although it will keep rates higher than it hinted in June. Powell attributed the hawkish policy path to a recent strengthening in the economy that could push up inflation. "The stronger economic activity means that we have to do more with rates," Powell said in response to a question about why the Fed would cut interest rates less frequently next year.

Hong Kong Stock Connect had a net inflow of HK$3.1bn on Wednesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$0.5bn; followed by Meituan (3690). Kuaishou (1024) recorded the largest net outflow at HK$0.25bn, followed by HKEX (388).