Alibaba, JD.com drive Hong Kong stocks to biggest gain in two weeks on China policy rate cut, Fed pause

China’s central bank cut one-year rate on medium-term lending facility as expected, after injecting more liquidity this week to rejuvenate a faltering economy

The Fed paused its rate-hike spree while signalling more increases may be necessary this year to tame inflation

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A man rides a bicycle outside the People’s Bank of China headquarters in Beijing in August 2022. Photo: EPA-EFE

Published: 10:04am, 15 Jun 2023Updated: 4:48pm, 15 Jun 2023

Hong Kong stocks jumped by the most in two weeks after China cut borrowing costs to rejuvenate the economy as economists predicted. Prices advanced even as the Federal Reserve left the room for more rate hikes, after hitting the pause button at its June meeting.

The Hang Seng Index surged 2.2 per cent to 19,828.92 at the close of Thursday trading, taking the benchmark to the highest level since May 16. The Tech Index strengthened 3.6 per cent, while the Shanghai Composite Index added 0.7 per cent.

Tencent gained 2.7 per cent to HK$355, Alibaba Group climbed 4.5 per cent to HK$89 and JD.com gained 5.2 per cent to HK$155.20. Carmaker BYD advanced 3.8 per cent to HK$268.60, and Xpeng added 4 per cent to HK$43.30. Developer China Resources Land rallied 2.7 per cent to HK$34.10, and peer Country Garden added 6.3 per cent to HK$1.87.

“Expectations are building that additional stimulus will come from Beijing,” Tai Hui, Asia-Pacific chief market strategist at JPMorgan Asset Management, said in a report before the central bank move. “This could be the much needed catalyst for the Chinese market to overcome a disappointing first half.”

Traders scooped up Chinese stocks at home and in Hong Kong this month, following losses in April and May, as bets on China stimulus grew. The rally this month has boosted the market capitalisation of Hang Seng Index members by HK$1.8 trillion (US$230 billion), while the CSI 300 onshore members gained almost 1 trillion yuan.

China’s central bank today cut the one-year medium-term lending facility rate to 2.65 per cent from 2.75 per cent, in line with forecasts tracked by Bloomberg. The cut is the first since August 2022, before more government reports today signalling further slowdown in the economy.