Hong Kong stocks advance as China hints at rate cut while Fed minutes signal less hawkish tilt in rate policy

China will use more monetary policy tools to help revive the economy, State Council says, stoking speculation the central bank will cut reserve ratio soon
Fed minutes from November’s policy meeting showed a significant majority of members turning less hawkish on rate increases

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:33am, 24 Nov, 2022

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Hong Kong stocks rose for a second day on speculation China will lower borrowing costs soon, while most Federal Reserve policymakers turned less hawkish on rate policy. Stocks in Malaysia jumped after a political breakthrough to end a hung parliament.

The Hang Seng Index climbed 0.8 per cent to 17,660.90 at the close. The Hang Seng Tech Index gained 0.8 per cent, while the Shanghai Composite Index slipped 0.3 per cent.

Country Garden led a rally among Chinese developers, jumping 20 per cent to HK$2.83, while Longfor Group surged 12 per cent to HK$21.05. HSBC gained 1.8 per cent to HK$46, and Hong Kong Exchanges & Clearing rose 1 per cent to HK$291.40. Losses in tech leaders like Tencent Holdings and Xiaomi tempered optimism amid record-high Covid-19 cases in mainland China.

China will use more monetary tools, including a reduction in the amount of funds commercial lenders keep as reserves, to boost lending, the State Council said on Wednesday. The central bank typically cuts banks’ reserve requirement ratio within days of such comments.

The People’s Bank of China last cut the ratio on April 25, the only such reduction this year, and twice in 2021, despite rapid signs of deterioration in the economy. Separately, Chinese banks and authorities are ramping up aid to ease a liquidity crunch in the property industry.

“Monetary easing and adjustments to pandemic-control measures will help restore industrial production and consumer spending,” said Cao Xute, a strategist at Shengang Securities. “Corporate earnings are expected to trend up. They will continue to boost low-valuation stocks.”

01:27

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Stocks also advanced following overnight gains in US equities, as traders seized on a dovish tilt among Fed officials. A substantial majority of participants judged that a slowing in the pace of increase “would soon be appropriate” while some members expressed concerns rate hikes might ultimately “exceed what was required” to tame inflation.

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“The general tone of the members confirmed that the committee was leaning towards moving away from jumbo rate hikes,” Saxo analysts wrote in a report. “The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions.”

Traders work on the floor of the New York Stock Exchange on September 21. Photo: AFP

China recorded 31,444 new infections on Wednesday, surpassing the pandemic-high of 29,317 on April 13, with the cities of Guangzhou and Chongqing making up most of new cases. Stocks retreated earlier this week as the flare-up undermined bets for a pivot in zero-Covid policy.

Elsewhere, Meituan gained 0.4 per cent to HK$138.90 before its quarterly report card on Friday. Prosus, Tencent’s biggest foreign shareholder, said that it will treat Meituan shares as “assets for sale” when they arrive as interim dividends from the WeChat operator in January.

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In Kuala Lumpur, the Composite Index climbed 3.8 per cent, the most since March 2020, after the Malaysian King named Anwar Ibrahim as the new prime minister, ending a political impasse. A nationwide poll over the weekend had produced no winner with a simple majority in parliament. The ringgit reached 4.4952 per dollar, the strongest since September.

LX Technology Group, which offers technical subscription and data life cycle management services, rose 2.6 per cent to HK$7.80 on its first day of trading in Hong Kong. Fellow debutant Hunan New Wellink Advanced Metallic Material, which makes products like spherical zinc powders, was unchanged at 9.60 yuan in Beijing.

Other major Asian markets advanced. Japan’s Nikkei 225 and South Korea’s Kospi both climbed 1 per cent, while Australia’s S&P/ASX 200 added 0.1 per cent.

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