Hang Seng Index, ASX200, Nikkei 225: HK Budget Delivers HSI Support

Key Insights:

• It was a mixed morning session for the Asian markets, with the ASX 200 and the Nikkei 225 seeing red, while the Hang Seng Index found budget support.
• Economic indicators from the US, HK, and Australia delivered mixed results as investors look ahead to the FOMC meeting minutes due overnight.
• Fed Fear remained the theme today, with the US economy performing hotter than expected.

Market Overview

It was a mixed morning session, with the Hang Seng Index bucking a bearish trend. On Tuesday, Prelim US Services PMI numbers for February fueled bets of a more hawkish Fed policy outlook. With the latest string of US economic indicators signaling a robust US economy, the markets expect the Fed to push rates higher for longer to bring inflation to target.

The consensus is that the Fed will push ahead until cracks reappear. Considering a US unemployment rate of 3.4% and the sharp pickup in service sector activity, it could take some time for the Fed to feel the need to take its foot off the gas. Significantly, the latest numbers could support a return to 50-basis point rate hikes.

With the FOMC meeting minutes due later today and FOMC member Williams speaking late in the US session, investors were cautious this morning. On Tuesday, the NASDAQ Composite Index tumbled by 2.50%, with the S&P 500 and Dow Jones seeing losses of 2.00% and 2.06%, respectively.

Unsurprisingly, the bearish mood spilled over to the Asian session.

ASX 200

The ASX 200 was down 0.32%, with the Dow and Australian economic indicators leaving the ASX 200 in the red. Wage growth figures were in focus this morning. In Q4, wages were up 3.3% year-over-year versus 3.1% in Q3. However, economists forecast wage growth of 3.5%, which limited the damage amidst hawkish RBA chatter.

Bank stocks had a mixed morning. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) were down 1.97% and 0.27%, respectively. While Westpac Banking Corp (WBC) was flat, ANZ Group (ANZ) bucked the trend, rising by 1.06%.

However, mining stocks had a bearish morning session. Rio Tinto (RIO) and BHP Group Ltd (BHP) were down by 0.60% and 0.17%, respectively, with Fortescue Metals Group (FMG) sliding by 1.80%. Newcrest Mining (NCM) was down by 1.75%.

Woodside Energy Group (WDS) and Santos Ltd (STO) delivered support, with gains of 0.17% and 3.16%, respectively. The morning gains came despite a pullback in crude oil prices on Tuesday. Investors responded to news of Santos hiking its dividend payout on record full-year earnings results. Year-over-year, Santos increased its dividend by 78% to US15.1 cents. Net profit increased by 221%.

Woolworths Group Ltd (WOW) was also up in response to upbeat earnings results. This morning, Woolworths Group Ltd was up 1.58%.

Hang Seng Index

The Hang Seng was up 0.20% this morning. The trend-bucking gain came despite Fed Fear gripping the global financial markets ahead of today’s FOMC meeting minutes.

Economic data from Hong Kong were in line with forecasts this morning. In Q4, the economy contracted 4.2% year-over-year versus a 4.6% contraction in Q3. While the GDP numbers were grim, details of the 2023/24 budget provided support. Financial Secretary Paul Chan announced that HK would issue more consumption vouchers to consumers to support the economic recovery.

Tencent Holdings Ltd (HK:0700) was down 0.55%, with Alibaba Group Holding Ltd (HK:9988) falling 1.26%

It was a mixed morning for banking stocks. HSBC Holdings PLC was up 4.32%, while China Construction Bank (HK: 0939) fell by 0.60%. Industrial and Commercial Bank of China (HK:1398) was up by a modest 0.50%. Better than expected earnings delivered the HSBC boost, with hopes of a special dividend driving investor demand.

CNOOC (HK: 0883) struggled following the Tuesday pullback in crude oil prices, falling by 0.34%.

Nikkei 225

The Nikkei 225 was down 0.61% this morning, despite a stronger USD/JPY at 134.939, with sentiment toward central bank policy weighing. A more hawkish Fed could materially impact the global macroeconomic environment, leaving the Nikkei on the back foot.

Tokyo Electron Ltd (8035) fell by 1.63%, with SoftBank Group Corp. (9984) and Fast Retailing Co (9983) seeing losses of 1.75% and 1.61%, respectively. Sony Corp (6758) also struggled, falling by 1.94%, with KDDI Corp (9433) declining by 0.60%.

Check out our economic calendar for today’s economic events.