Hong Kong stocks snap 7-day slide as Fed tapering seen as ‘pro-growth’ signal while border reopening awaited

The markets’ main conclusion from the Fed move appears to have been a ‘pro growth’ theme, which boosted risk appetite, PGIM Fixed Income says
Hong Kong officials are discussing plans to allow quarantine-free travels to Guangdong province from as early as next month, Post reports

Hong Kong stock market

Cheryl Heng

Published: 10:55am, 4 Nov 2021

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Corrected [2:47pm, 8 Nov, 2021]

[2:47pm, 8 Nov, 2021]
Corrects the location of PGIM Fixed Income in the seventh paragraph

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Hong Kong stocks rose, snapping a seven-day slide, as analysts viewed the Federal Reserve’s decision to start its tapering process as a pro-growth signal. Stocks also gained on optimism efforts to reopen the city’s border mainland China will quicken.

The Hang Seng Index appreciated 0.8 per cent to 25,225.19 at the close of Thursday trading for its best gain in two weeks. The Hang Seng Tech Index jumped 1.6 per cent, with Alibaba Group Holding, Tencent Holdings and Meituan adding at least 2.5 per cent. The Shanghai Composite Index advanced 0.8 per cent.

Chinese electric carmaker BYD emerged as the benchmark‘s top performer, rising 7.8 per cent to HK$315.60 as it reported an 88 per cent increase in its EV sales in October. MGM China and Wynn Macau led winners among Macau casino operators.

The Fed intends to dial back its bond purchases by US$15 billion a month with flexibility according to market conditions, and chairman Jerome Powell said inflation was transitory and the central bank could be “patient” in raising rates.

“Overall, [the] announcement ticked many of the boxes in starting the taper process without causing market disruption,” said Kerry Craig, global market strategist at JPMorgan Asset Management. The Fed also “[pushed] back a little on the market pricing for early rate hikes,” he added.

All the three key US stock indices reached fresh highs in overnight trading after the Federal Reserve decided to unwind its stimulus and reduce its bond purchases by US$15 billion a month, citing “substantial further progress” in the economy.

“The markets’ main conclusion appears to have been a ‘pro growth’ theme, which spurred a boost in risk appetite,” Ellen Gaske, lead economist at US investment manager PGIM Fixed Income wrote in a note.

That came as a relief for the local market, after the benchmark index slipped 4.2 per cent with HK$1.3 trillion (US$172 billion) in market value erased in the preceding seven trading days. A slowdown in the Chinese economy, sporadic Covid-19 outbreaks and a power crunch had weighed on sentiment.

Travellers arriving at Hong Kong-Zhuhai-Macao Bridge, Hong Kong Port in September 2021 Photo: Winson Wong

“We believe the previous decline in the Hong Kong stock market mostly reflected the pressure brought by taper in advance,” Guotai Junan Securities analyst Alex Bai wrote in a note.

Property developers were the biggest losers with Country Garden and its property services unit falling by least 3.3 per cent. Henderson Land retreated 2.9 per cent after buying a prime land plot in the city at a record high of HK$50.8 billion.

Following the Fed statement, the Hong Kong Monetary Authority said there’s ample liquidity in the local banking system and the local currency and interest rates remained steady.

Elsewhere, Hong Kong officials are discussing gradual resumption of quarantine-free travels from as early as next month, sources told the Post, in which Hongkongers will initially be limited to visiting southern Guangdong province.

Major Asian markets also advanced, as Australian and South Korean equities inched up at least 0.3 per cent each, while the Japanese benchmark gained 0.9 per cent.