China, Hong Kong stocks extend losses after Fed minutes stoke rate rise fears
Investors are cautious because of increased expectations of a hike in US interest rates.
The Shanghai benchmark index inched lower for a third straight session on Thursday, after hawkish Fed minutes released on Wednesday sparked fears of an early interest rate increase and triggered a sell-off in global risk assets. Hong Kong shares also retreated for a second day in a row.
However, China-listed steelmakers soared on Beijing’s vows to address overcapacity amid weakening underlying demand and rising trade tensions.
The Shanghai Composite Index opened slightly lower, then was pushed into positive territory mainly by gains in steel and metal sectors. However, the index was dragged lower by financial shares in late afternoon session and swung between small gains and losses in the final hour of trading. It nudged lower by less than 0.1 per cent, or 0.6 points, to close at 2,806.91. The large-cap CSI300 edged down 0.2 per cent, or 5.54 points, to 3,062.50.
But Shenzhen stocks registered modest gains, with the Shenzhen Composite Index rising 0.6 per cent, or 9.8 points, to end at 1,775.88. Startup board ChiNext Index also settled 0.8 per cent, or 16.93 points, higher at 2,037.40.
Combined turnover for Shanghai and Shenzhen decreased about 10 per cent to 376 billion yuan from Wednesday.
The US Federal Reserve may be considering an interest rate increase in June if incoming economic data are “consistent with economic growth picking up in the second quarter”, minutes of the Fed’s April policy meeting showed on Wednesday.
“What is clear from the minutes and recent speeches from Fed speakers is that the Fed is very keen to try and get two rate hikes out this year,” said Angus Nicholson, an analyst for IG Group. “And if that is the case, there will be a strong push to try to raise rates in June or July.”