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The Bund Bull statue and a screen displaying a thank you message for healthcare workers in Shanghai on June 1 as the city emerges from a lockdown. Photo: Bloomberg

Tech stocks lift Hong Kong market while Asian equities languish as investors fret about Fed policy outlook, recession

  • Chinese stocks are burnishing their appeal as a shelter from global weakness as the Fed’s aggressive tightening stokes recession concerns
  • Hang Seng Index has recouped 15 per cent of value since the mid-March slump as traders bet on China policy support
Hong Kong advanced, bucking losses in key Asian bourses, on optimism monetary easing and fiscal stimulus will shield the local markets while investors fret about risk of hard landing caused by policy tightening in the US.

The Hang Seng Index rose 1.1 per cent to 21,075.00 at the close of Friday trading, while the Tech Index jumped 2.3 per cent. Friday’s gains helped narrow declines for the week. The Shanghai Composite Index climbed 1 per cent. soared 6.1 per cent to HK$261.20, while Meituan also strengthened 5.2 per cent to HK$199.10 and Alibaba Group added 2.1 per cent to HK$104.50. AIA Group gained 2.2 per cent to HK$79.35. Haidilao and Xiaomi appreciated at least 3.6 per cent.

Major markets in the region languished. Benchmarks in Japan, South Korea and Australia slumped by 0.4 to 1.8 per cent. The broader Asia-Pacific market surrendered all its gain in the post-Fed rally on Thursday, as some global fund managers raised concerns about recession.

“Global growth momentum will shift from the US to China and the developing world as China reopens and deploys extremely stimulative macro policy while the Fed is tightening,” strategists at Alpine Macro said. “Watch for a revival in China’s credit cycle, increase in infrastructure spending, and rebound in the housing sector where peak stress is passing.”

The Federal Reserve boosted its key rate by 75 basis points at its June 15 meeting, the biggest rate hike since 1994. That followed a combined 75 basis points in the two preceding meetings. Global equities slipped into bear territory earlier this week, with investors still divided if further increases this year will tip the global economy into a recession.


Shanghai residents confront officials after swift return of lockdown

Shanghai residents confront officials after swift return of lockdown
Global stocks were headed for the worst week since the depth of Covid-19 pandemic in March 2020, with the Swiss central bank delivering a shock 50 basis points hike and the Bank of England delivering its fifth straight rate hike. US Treasury yields have spiked along with inflation in the run-up to the Fed decision, with curve inversion flashing recession signals.
In contrast, Chinese stocks have become a safe harbour from global rout. Foreign investors have bought more Chinese stocks on valuations appeal. The Hang Seng Index has rebounded 14 per cent since hitting a multi-year low following a sell-off on March 15 as Goldman Sachs said the worst is over.

The Hang Seng Index is still 3.4 per cent weaker for the week though, after logging a two-week winning streak. Hong Kong reported more than 1,000 virus cases for the first time since March. The local dollar has traded at its weakest side of the trading band, requiring the central bank’s intervention. Financial Secretary Paul Chan cautioned about capital flight.

“[We are still] a little negative on Hong Kong stocks,” said Paul Pong Po-lam, managing director of Pegasus Fund Managers. “We do not see light at the end of the tunnel yet and that could affect the city’s mortgage rates, spending attitudes and retail.”

Three companies traded for the first time on mainland bourses. Jiangsu Ruitai New Energy Materials soared 85 per cent on its first day of trading in Shenzhen, while Shanghai Menon Animal Nutrition Technology Co jumped 47 per cent. Shaanxi Tirain Science & Technology Co, which debuted in Beijing, was unchanged.