Hong Kong Stocks On Track For Highest Close This Month After Fed Rate Cut
Hong Kong stocks rose to their highest level this month after the Federal Reserve cut the benchmark interest rate by a half-point.
The Hang Seng Index climbed 1.1 per cent to 17,854.58 as of 10.47am local time. The Hang Seng Tech Index rallied 2.5 per cent and the Shanghai Composite Index added 0.9 per cent.
Hong Kong's stock market was closed for a public holiday on Wednesday.
Property developers led gainers in the market. China Resources Land jumped 6.7 per cent to HK$20.60, Longfor Group surged 6.9 per cent to HK$8.51 and China Overseas Land & Development advanced 5 per cent to HK$11.52. Alibaba Group Holding rose 2.3 per cent to HK$84.70 and Tencent Holdings added 1.1 per cent to HK$384.40.
The Fed's first rate cut in more than four years was accompanied by expectations for an additional reduction of 50 basis points by the end of the year. Rates traders were pricing in a reduction of 70 basis points. Fed Chair Jerome Powell poured cold water on the idea that more big rate cuts are coming. The S&P 500 Index briefly reached an all-time high before closing 0.3 per cent lower overnight.
"The Fed positioned the 50 basis-point rate cut as a recalibration of policy rates, rather than a sign of concern about the health of the labour market," said Ray Sharma-Ong, head of multi-asset investment solutions for Southeast Asia at abrdn. "The market is currently re-pricing for the Fed's guidance of ‘recalibration.' However, we see that risks are skewed towards more easing, and the Fed may move at a faster pace of rate normalisation than indicated by the median dot."
Just hours after the Fed's meeting, the Hong Kong Monetary Authority (HKMA) cut the city's base rate by 50 basis points to 5.25 per cent. The HKMA follows the Fed's monetary policy to defend the Hong Kong dollar's fixed exchange rate with the US dollar.
Still, the Hang Seng Index has lost 1 per cent this month on worries that China's deflationary trend will persist amid tepid domestic demand and a nagging downturn in the property market. A series of key economic reports for August, from industrial production to retail sales and investment, all fell short of economists' expectations.
Global investment firm Cambridge Associates says the misery for investors in Chinese stocks is likely to last for the rest of the year, due to an absence of meaningful monetary and fiscal policies, as well as geopolitical headwinds.
Investors should focus on companies in defensive sectors, with strong balance sheets, cash flow and earnings growth, because a near-term rebound in Chinese equities is unlikely, according to Desmond Foo, an investment director at Leo Wealth, an independent global wealth adviser.
Source : SCMP
