Hang Seng Index, Nikkei 225, ASX 200: HSI Rallies on Real Estate Sector Breakout

US Equity Markets Gained on Bets of a Fed Rate Cut.

The US equity markets started Q3 2024 on a positive footing. On Monday, July 1, the Nasdaq Composite Index gained 0.83%, while the Dow and the S&P 500 advanced by 0.13% and 0.27%, respectively.

Investors reacted favorably to the US ISM Manufacturing PMI numbers that signaled softer price trends and a weakening labor market environment. The ISM Manufacturing PMI fell from 48.7 in May to 48.5 in June. Furthermore, the ISM Manufacturing Prices fell from 57.0 to 52.1, with the ISM Manufacturing Employment down from 51.1 to 49.3.

The numbers aligned with recent US inflation figures that signaled a softening inflation environment. Additionally, the ISM Manufacturing Employment drop below 50 was significant. A drop below 50 signifies a contraction in the manufacturing sector labor market. The Index had trended higher for three months before returning below the 50 mark.

Rising hopes for a September Fed interest rate cut supported a positive Tuesday morning session for the Asian equity markets.

However, house price data from China, USD/JPY trends, and sentiment toward the RBA rate path also needed consideration.

Hang Seng Index Gains on Tech and Real Estate Sector Rallies

Meanwhile, the Hang Seng Index gained 1.46% on Tuesday morning. Investors reacted to new home sales data from China, with the Hang Seng Mainland Properties (HSMPI) surging 4.56%.

According to CN Wire, the top 100 Chinese property developers reported a 36.3% month-on-month increase in new home sales in June.

CN Wire commented on the sales figures, stating,

“Compared to June, based on July of last year being the lowest point for the whole year, we expect a significant narrowing of the year-on-year decline for the single month.”

Tech stock gains from the US on hopes of a September Fed rate cut supported buyer demand for HSI-listed tech stocks. The Hang Seng Tech (HSTECH) Index was up 1.05%.

Alibaba (9988) and Tencent (0700) saw gains of 1.63% and 0.81%, respectively, while Baidu (9888) declined by 0.76%.

However, the mainland China markets continued to struggle. The Shenzhen Composite and CSI 300 declined by 0.52% and 0.08%, respectively.

Could an improvement in the Chinese real estate market and multiple 2024 Fed rate cuts signal a Hang Seng Index return to 20,000?

Nikkei Edges Higher as the Yen Languishes at 161.6 Against the US Dollar

The Nikkei Index advanced by 0.68% on Tuesday morning. On Tuesday, the USD/JPY advanced to a morning high of 161.664, supporting buyer demand for export stocks.

Sony Group Corp. (6758) increased by 1.16% as investors reacted to plans to open a crypto exchange. Softbank Group Corp (9984) gained 0.05%, while KDDI Corp. (9433) rose by 0.48%.

While the Nikkei 225 was up through the morning, investors should monitor comments from the Bank of Japan and the Japanese government. BoJ or government plans to intervene to bolster the Yen could reverse the morning gains.

ASX 200 Stock Index Bucks the Positive Broader Market Trend

The ASX 200 fell by 0.19% on Tuesday morning, with the big four banks and tech stocks contributing to the losses. Uncertainty about the RBA interest rate trajectory adversely affected buyer demand for ASX 200-listed rate-sensitive stocks.

Australian news site news.com.au commented on the minutes, stating,

“The Reserve Bank has released the minutes from its June board meeting where it considered another rate hike. The discussion shows some storm clouds for homeowners.”

The S&P ASX All Technology Index (XTX) slipped by 0.03%, with National Australia Bank Ltd. (NAB) falling by 0.80%.

However, Gold and Oil-related stocks cushioned the losses. Evolution Mining Ltd (EVN) advanced by 1.75%, with Woodside Energy Group Ltd (WDS) rallying 2.30% on rising overnight gold and oil prices.

In conclusion, housing prices from China suggested policy measures from Beijing are effective. Fed rate cut bets also sent bullish signals for the Hang Seng Index. However, the ASX 200 will remain at the mercy of the RBA rate path, with the Nikkei in the hands of the Yen, the Bank of Japan, and the Japanese government.