Hong Kong stocks gyrate as Fed chair Powell strikes hawkish tone on inflation

Blue chips Li Auto and AIA gain on technical indicators, while Alibaba, NetEase and Galaxy Entertainment end lower

With Fed chairman Jerome Powell saying it could take ‘longer than expected’ to get inflation back on target, traders pare back bets on a rate cut in June

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Hong Kong stocks rose on Tuesday after a four-day sell-off pushed the city’s benchmark to the lowest level since March 7. Photo: EPA-EFE

Published: 11:09am, 17 Apr 2024Updated: 4:51pm, 17 Apr 2024

Hong Kong stocks fluctuated near a five-week low on the US Federal Reserve’s hawkish inflation tone, alarming investors that rates could remain higher for longer, while a rebound in some blue chips helped to stem losses.

The Hang Seng Index added less than 3 points, closing practically flat at 16,251.84 on Wednesday, after oscillating between a 0.4 per cent gain and 0.6 per cent loss during the day. The Tech Index added 0.1 per cent, while the Shanghai Composite Index jumped 2.1 per cent.

Electric-car maker Li Auto rallied 4 per cent to HK$114.90, drug maker Wuxi Biologics added 2.1 per cent to HK$13.32 and insurer AIA jumped 1.8 per cent to HK$46.85, after their 14-day relative strength indicator readings approached 30, a closely watched technical sign that these stocks are in an oversold zone.

Limiting gains, e-commerce giant Alibaba Group Holding fell 0.7 per cent to HK$68, Meituan lost 1.2 per cent to HK$97.55, and gaming firm NetEase slipped 0.8 per cent to HK$141.10. Macau casino operator Galaxy Entertainment Group tumbled 7.1 per cent to HK$34.20 and peer Sands China lost 3.3 per cent to HK$19.04.

Federal Reserve chair Jerome Powell struck a hawkish note on inflation. Photo: AP Photo

Sentiment took a hit after Fed chair Jerome Powell struck a cautious note on inflation, saying it could take “longer than expected” to get inflation back on target. Traders have pared back their expectations of a rate cut at the Fed’s June meeting, with only a 14.9 per cent chance, compared with 56.1 per cent a week ago, according to CME’s FedWatch tool.