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Hong Kong stock market
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Hong Kong stocks advance as US rate cut prospects brighten, developers surge

  • US consumer prices dropped for the first time in four years, raising prospects of a September rate cut to 86 per cent from 70 per cent, according to CME

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Visitors rest in front of a portrait of former Chinese leader Mao Zedong at Tiananmen Square in Beijing, China, on Wednesday, July 10, 2024. The Third Plenum, set for July 15-18, is one of the most important political meetings of the Chinese Communist Party. It’s expected to unveil a series of economic reforms and policies aimed at addressing long-standing issues that have impeded growth and recovery. Photo: Bloomberg
Zhang Shidongin Shanghai
Hong Kong stocks rose on Friday and the benchmark capped a second week of gains, as cooling US inflation bolstered expectations that the Federal Reserve will make an interest-rate cut at its September meeting, adding to the lure of non-US dollar-denominated assets.
The Hang Seng Index surged 2.6 per cent to 18,293.38 at the close. Its 2.8 per cent rise was the highest weekly gain in two months. The Hang Seng Tech Index added 2.3 per cent. But the Shanghai Composite Index was flat, as the impact from regulatory curbs on short-selling on the mainland faded and after investors reined in their expectations from the third plenum, due to kick off on Monday.

Sun Hung Kai Properties and other Hong Kong-based developers rallied on prospects that cheaper funding costs will revive home sales in the city. The Hong Kong dollar is pegged to the US dollar which means the Hong Kong Monetary Authority raises or cuts the city’s benchmark interest rates in lockstep with rate changes by the Fed.

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The probability of a rate cut by the Fed in its September policy meeting has risen to 86.4 per cent now from 70 per cent before the US inflation data, according to the CME Group’s FedWatch tool.

“The Fed’s rate cut will leave the door open for more accommodative monetary policies in China to reinforce expectations about a recovery in economic growth,” said Li Lifeng, a strategist at Huaxi Securities in Shanghai. “An increased risk appetite will be reflected in the stock market and there’ll be more upside room for both Hong Kong and Chinese stocks.”

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Sentiment also got a lift from an official report showing better-than-expected exports. China’s overseas shipments increase 8.6 per cent from a year ago, the customs office said on Friday, beating the consensus estimate of 8 per cent growth. Imports remained muted, falling 2.3 per cent year-on-year.
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