Hong Kong stocks weakened as developers slipped on rate outlook after the Federal Reserve raised its key rate by the most since 1994 to contain inflation. Asian stocks surrendered gain as more tightening moves fanned recession risks. The Hang Seng Index dropped 2.2 per cent to 20,845,42 at the close of Thursday trading, after earlier logging as much as a 1.1 per cent gain. The Tech Index slid 3.3 per cent, while the Shanghai Composite Index declined 0.6 per cent. The MSCI Asia Pacific Index lost 0.5 per cent, reversing a 1.5 per cent rally, according to Bloomberg data. “The Fed’s monetary tightening is not without recessionary risk,” brokerage Chares Schwab said in a statement. “Ten out of the previous 13 rate-hike cycles have been associated with recessions. The present risk of a downturn increases when you consider the myriad pressures on growth, including Russia’s invasion of Ukraine, supply shortages, and inflation.” An index tracking property developers tumbled 2.5 per cent on concerns higher borrowing costs will crimp home purchases and the city’s government warned of more capital flight . Sun Hung Kai Properties slipped 1.2 per cent to HK$90.80 while Henderson Land lost 2.7 per cent to HK$28.55. Selling pressure increased in late trading, punishing Chinese tech stocks from winning positions. Alibaba Group Holding retreated 3 per cent to HK$102.40. NetEase sank 5.3 per cent to HK$154 and Meituan lost 4 per cent to HK$189.20. Tencent weakened 3.2 per cent while JD.com fell 1.7 per cent. US policymakers raised its target range for the federal funds rate by 75 basis points to a range of 1.5 per cent to 1.75 per cent, after consumer prices jumped by the most in four decades last month. While the Fed may repeat the act in the July meeting, Chair Jerome Powell told reporters “I do not expect moves of this size to be common.” The Hong Kong Monetary Authority (HKMA) responded by raising its base rate by 75 basis points to 2 per cent on Thursday. Financial Secretary Paul Chan said higher US rates could lead to more capital flight, even as the HKMA intervened again in the foreign exchange market on Thursday to defend the local currency. “The tightening of financial conditions, and maintaining it for a prolonged period, will end up killing the economic growth cycle,” said Ray Sharma-Ong, investment Director for multi-asset solutions at abrdn, a UK asset manager. “We should not rule out the possibility of a 100-basis-point hike in future meetings.” Chinese stocks retreated, after withstanding a sell-off earlier this week as global equities slumped into bear territory. About US$485 billion of market value has been added since the mid-March plunge, as traders bet on policy stimulus from Beijing to revive the economy ravaged by Covid-19 lockdowns. Economic data for May generally outperformed market expectations, signalling the effects of policy easing before and during the citywide lockdown in Shanghai and other mainland cities over the past three months. That optimsm eluded the troubled housing sector. New home prices in 70 major mainland cities dropped 0.17 per cent in May from April, a ninth month of decline, the statistics bureau said. China Resources Land fell 2.3 per cent to HK$4.29.