Alibaba, Tencent gain as Hong Kong stocks snap 2-day slump on China data while markets eye Fed rate cut in May
- The Federal Reserve kept its target rate unchanged, pushing back market expectations for a rate cut to the third policy meeting in May
- Hang Seng Index ended January as the worst performer among major world equity benchmarks amid worries about China’s economy
The Hang Seng Index advanced 0.5 per cent to 15,566.21 at the close, halting a two-day, 3.7 per cent slump. The Tech Index surged 2 per cent, while the Shanghai Composite Index lost 0.6 per cent.
Alibaba Group rebounded 2.2 per cent to HK$71.05, snapping a two-day slide. E-commerce peer JD.com added 0.8 per cent to HK$87.50 and Tencent advanced 0.4 per cent to HK$271.60. Online games operator NetEase rallied 2.8 per cent to HK$155.80 and Baidu climbed 1.4 per cent to HK$102.80.
Chinese hotpot restaurant operator Haidilao surged 4.6 per cent to HK$12.82 and Chinese sportswear make Li Ning advanced 6.1 per cent to HK$17.62.
The Fed kept its target range for funds rate at 5.25 per cent to 5.5 per cent, unchanged for a fourth straight meeting on Wednesday in Washington. The decision prompted traders to bets on a rate cut at the Fed’s third meeting in early May, after Chair Jerome Powell suggested it would be premature to do so in March.
The odds of a rate cut in March fell overnight to about 35 per cent from about 73 per cent a month ago, according to data compiled by CME Group. There is about 61 per cent chance of a cut on May 1, versus 53 per cent a week ago, and 11 per cent a month earlier.
Hong Kong holds base rate steady as Fed votes to ‘keep options open’
The Fed statement “suggested the next move will be rate cuts,” said Tai Hui, a strategist at JPMorgan Asset Management. “History suggests that both equities and bonds can deliver positive return when the Fed cuts rates as a precaution to engineer a soft landing, rather than reacting to a financial crisis or a severe recession.”
Elsewhere, the Caixin/S&P PMI Manufacturing Index held at 50.8 in January, staying in an expansionary mode for a third month. It contrasted with the official China PMI index this week that showed a fourth month of contraction.
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The Hang Seng Index tumbled by 9.2 per cent in January, the worst since a 9.4 per cent slump in February last year. That setback also ranked as the worst among major equity benchmarks globally, amid worries about China’s manufacturing slump, domestic price deflation and the yuan outlook.
Other major Asian markets were mixed. Japan’s Nikkei 225 slipped 0.8 per cent and Australia’s S&P/ASX 200 lost 1.2 per cent, while South Korea’s Kospi climbed 1.8 per cent.
