Alibaba, Geely, HSBC lift Hong Kong stocks on Fed pause bets while Xpeng surges by record 34 per cent as VW eyes stake purchase

The odds of a Fed pause in September rose to 78 per cent, from less than 2 per cent a week ago, as Powell keeps maximum policy optionality on the table
Xpeng surged by record since its 2021 IPO after Volkswagen unveiled a plan to invest US$700 million for a 4.99 per cent stake in the Chinese Tesla rival

Hong Kong stock market

Jiaxing Li

Published: 10:29am, 27 Jul 2023

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Hong Kong stocks climbed to a five-week high, tracking overnight gains in US equities, as traders bet the Federal Reserve is almost done with its policy tightening. The odds of a pause in its September meeting surged. Xpeng soared by a record 34 per cent.

The Hang Seng Index gained 1.4 per cent to 19,639.11 at the closing of Thursday trading, the highest since June 29. The Tech Index jumped 2.9 per cent, while the Shanghai Composite Index lost 0.2 per cent.

Alibaba Group rose 1.7 per cent to HK$95.45, Meituan appreciated 1.3 per cent to HK$136.60, and JD.com strengthened 1.2 per cent to HK$151.30. Tencent gained 0.8 per cent to HK$343.80, NetEase added 1.9 per cent to HK$170.50 and Trip.com jumped 1.8 per cent to HK$301.20.

EV maker and Tesla rival Xpeng surged as much as 34.5 per cent to HK$81.35, a record price-change since its listing in 2021, before closing at HK$81. Macau casino operator Galaxy Entertainment rose 3.9 per cent to HK$56.65 while developer Country Garden jumped 11.8 per cent HK$1.61.

The Fed raised its key interest rate by a quarter point on Wednesday to a range of 5 per cent to 5.25 per cent, bringing the policy rate to the highest in more than two decades and signalled future action will depend on incoming data. The Hong Kong Monetary Authority also lifted its base rate in lockstep to a level not seen since 2007.

“We think the Fed will pause in September,” Ray Sharma-Ong, investment director of multi-asset investment solutions at abrdn, said in a report. Sequential weakening in activity will give Fed space to pause, and Powell indicated [it] can afford to be patient, given where policy rates are at present.

Hong Kong raises base rate to 5.75 per cent, the highest since 2007

Fed fund futures showed the odds of a pause in September rose to 78 per cent after the decision, versus 1.8 per cent a week ago, according to data compiled by CME Group. Financial conditions have been easing with pricing of rate cuts in 2024, Bank of America said before the decision, although Fed Chair Jerome Powell will not want to sound dovish.

The rally in Xpeng added about HK$28.3 billion (US$3.6 billion) to its market value. German carmaker Volkswagen planned to buy a 4.99 per cent stake in the company for about US$700 million to stem sliding sales in the world’s biggest market, its top executive in China said.

The equity purchase plan mirrors an earlier move by the Abu Dhabi government last month to pay US$738 million for a stake in rival Nio. Rival German carmaker Audi earlier this week also said it will partner with SAIC Motor to establish an EV development platform.

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Vehicle number 10,000 rolls off the assembly line for Chinese electric carmaker XPeng

Investors rode several rounds of good news for stock markets this week. China’s Politburo on Monday delivered a dovish statement on the state of the economy, spurring bets among investors on more Beijing stimulus to revive growth. Foreign fund inflows into onshore markets surged.

The rate-pause outlook also buoyed Hong Kong banks and property developers. HSBC added 0.5 per cent to HK$64.95 and Bank of China jumped 1.4 per cent to HK$2.83. Sun Hung Kai Properties gained 1.6 per cent to HK$99.05 and New World Development strengthened 2.3 per cent to HK$19.44.

Anhui Shunyu Water jumped 63 per cent to 34.11 yuan per share on its first day of trading in Shenzhen.

Major Asian stocks traded higher on Thursday. The Nikkei 225 in Japan and the S&P/ASX 200 index in Australia both gained 0.7 per cent, while the Kospi index in South Korea climbed 0.4 per cent.

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