Hong Kong stocks retreat from two-week high as Fed chair Jerome Powell’s hawkish comments on rate increases spur regional rout

The Hang Seng Index dropped 0.7 per cent in Monday trading, the Hang Seng Tech Index lost 1.2 per cent, and the Shanghai Composite Index rose 0.1 per cent

Techtronic Industries and laptop maker Lenovo lead the declines in Hong Kong

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US Federal Reserve Chair Jerome Powell attends a press conference in Washington is this file photo from July 27, 2022. Powell flagged the likely need for restrictive monetary policies for some time in a speech during the Fed’s Jackson Hole symposium last week. Photo: Xinhua

Published: 10:50am, 29 Aug 2022Updated: 4:23pm, 29 Aug 2022

Hong Kong stocks fell from a two-week high on Monday morning, joining a sell-off in the region, after Federal Reserve Chair Jerome Powell hinted over the weekend that higher borrowing costs would stay in place longer than expected, offsetting optimism that China and the US had removed a regulatory risk by resolving their dispute over access to audit data.

The Hang Seng Index dropped 0.7 per cent to 20,023.22 at the close, surrendering some of the 2 per cent gain made last week. The Hang Seng Tech Index lost 1.2 per cent, while the Shanghai Composite Index in mainland China added 0.1 per cent.

Of the Hang Seng Index’s 69 members, 57 ended lower on Monday. Power tool maker Techtronic Industries and laptop producer Lenovo Group were among the worst performers, falling by at least 4 per cent. Meituan, China’s biggest on-demand service provider, rallied 2.6 per cent to HK$186.70 after its second-quarter revenue beat estimates.

In a speech during the Fed’s Jackson Hole symposium last week, Powell hinted that interest rate increases were far from over and that borrowing costs might need to stay at elevated levels for some time until US inflation was fully tamped down. While highlighting the risks involved in a premature loosening of monetary policies, he also warned of the potential pain households and businesses would need to bear because of the tightened financial conditions.

His hawkish stance dashed hopes among some traders that the increases in interest rates would slow or even pause – hopes that have underpinned a rebound in US stocks over the past two months.