KGI Asia Commentary
Hang Seng Index fell 29 points on Tuesday
The Hang Seng Index fell 29 points or 0.2% to 17,396 on Tuesday. HSTECH fell 29 points or 0.7% to 3,951 and HSCEI fell 24 points or 0.4% to 5,964. Daily market turnover was HK$76.7bn.
U.S. inflation slows in October, Dow rises nearly 500 points
The Dow closed higher on Tuesday as falling U.S. Treasury yields paved the way for gains in technology stocks and a weaker-than-expected inflation report bolstered investor expectations that the Federal Reserve's rate-hiking cycle is over. The Dow Jones Industrial Average rose 489 points, or 1.4%, the S&P 500 rose 1.9%, and the Nasdaq rose 2.4%. Big tech stocks rose, led by Alphabet and Meta Platforms, while falling U.S. Treasury yields supported the market's preference for growth sectors. Leading the market's gains on Tuesday was the Technology Select SPDR Fund (XLK), which tracks S&P 500 technology stocks. The fund closed at a record high as investors returned to sectors hardest hit by rising interest rates. Tesla shares rose more than 6%. Home Depot shares rose more than 5% after the company reported third-quarter earnings that beat Wall Street expectations, with third-quarter comparable sales falling 3.1%, a smaller-than-expected decline as customers undertook more modest projects and home repairs. The retailer also narrowed its full-year forecast and now expects sales to fall 3% to 4% from the previous year, compared with its previous forecast of a 2% to 5% decline. Target will report earnings on Wednesday, while Walmart and Macy's will report on Thursday. Fisker shares fell 18% after the electric car maker reported disappointing earnings and said it would delay quarterly regulatory filings. Bank stocks including Bank of America and Wells Fargo jumped on hopes the U.S. economy might avoid recession.
Inflation cools more than expected, pushing Treasury yields lower
The U.S. Bureau of Labor Statistics announced on Tuesday that the Consumer Price Index (CPI) rose 3.2% in October from a year earlier, down from 3.7% in September. Gasoline prices were a big driver of October's price decline. Housing inflation also continues to cool. Excluding volatile food and energy prices, core CPI rose 0.2% month-on-month and 4% year-on-year, below expectations of 0.3% and 4.1% respectively. Shelter costs, a key component of the index, rose 0.3% in October, half of September's gain, while annual growth fell back to 6.7%. After the report was released, federal funds futures price data showed that interest rates may remain steady at the next Fed policy meeting. The 10-year Treasury rate shocked investors by briefly exceeding 5% in October, but fell below 4.5% after the soft inflation report.
Hong Kong Stock Connect had a net inflow of HK$1.36bn on Tuesday, of which Tracker Fund (2800) had the largest net inflow, reaching HK$1.05bn; followed by MOG DIGITECH (1942). Meituan (3690) recorded the largest net outflow at HK$0.30bn, followed by Xiaomi (1810).
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