KGI Asia Commentary

HSI fell 23 points on Monday

The Hang Seng index fell 23 points today to 15,510. The HSCEI was flat at 5,217; the HSTECH fell 5 points or 0.2% to 3,039. The total daily turnover of the market was HK$94.7bn. WuXi AppTec (2359) repeatedly clarified the draft legislation, and its stock price rebounded 4%, while WuXi Biologics (2269) also rebounded 3.1%. According to domestic media reports, the first batch of real estate project "whitelists" has been sent to commercial banks, involving a total of 3,218 projects, but Longfor (0960) stock price still fell 4.1%.

OECD expected U.S. inflation to return to long-term target next year

The OECD is the most optimistic about inflationary pressures in the U.S. this year and is expected to become the fastest among the G7 countries to cut interest rates. The interim outlook released by the OECD on Monday predicts that the U.S. inflation rate will be only 2.2% in 2024 and 2% in 2025, which is one of the lowest inflation rates among G7. Only Italy is lower than the U.S. The country with the highest forecast inflation this year is the UK, with 2.8%, and 2.4% in 2025. The year-on-year decline of 0.4% is also the thinnest after the U.S. and Italy. In terms of rate cut forecasting, the OECD expects the Fed to start cutting interest rates as early as the 2Q24, while in Europe it will start in the 3Q24.

All three major U.S. stock indexes recorded declines, with the DJIA falling 274 points or 0.71% to close at 38,380; the S&P 500 falling 15 points or 0.32% to close at 4,942; and the Nasdaq composite falling 31 points or 0.20% to close at 15,597.

U.S. ISM services PMI rises to 53.4, much higher than expected

Although the OECD's interim report delivered a relatively optimistic forecast for U.S. inflation, the latest services PMI showed that the U.S. economy is very strong. The ISM announced that the services PMI in January was 53.4, significantly higher than the 50.5 last month and exceeding market consensus of 52. The index's sub-items recorded increases, with the more important new orders, backlog of orders and employment all recording above 50, reflecting respondents' optimism about the outlook. It is worth noting that price pressure rose sharply to 64.0, from 57.4 last month, far exceeding the expected 56.5, reflecting that service inflation is significantly strong.

Hong Kong Stock Connect saw a net inflow of HK$3.90bn on Monday, of which Tracker Fund (2800) had the largest inflow, reaching HK$3.37bn; followed by HSCEI ETF (2828). Tencent Holdings (0700) recorded the largest net outflow of HK$216mn, followed by Meituan (3690).