Fed-linked rally fizzles out as Hong Kong stocks end lower amid losses in insurers, gaming firms

Property firms remain buoyant even after Hong Kong’s de facto central bank raises interest rates by 25 basis points to match US increase

PUBLISHED : Thursday, 14 December, 2017, 9:30am
UPDATED : Thursday, 14 December, 2017, 8:05pm

Hong Kong stocks gave up early gains and closed marginally lower on Thursday, weighed down by insurers and gaming stocks, as the morning’s rally that followed the Federal Reserve’s widely expected increase in interest rates petered out.

The Hang Seng Index slipped 0.2 per cent to close at 29,166.38, after rising by as much as 0.5 per cent earlier in the day.

The Hang Seng China Enterprises index, however, inched up 0.1 per cent to 11,531.73.

Daily turnover remained unchanged from Wednesday, at HK$10.6 billion on the main board.

“The market was initially boosted after confirmation that the Fed’s pace of rate increases will remain gradual,” said Ben Kwong Man-bun, director at KGI Asia.

“But the market was then dragged down by weak Chinese A shares.”

Insurers declined, with AIA Group sliding 2 per cent to HK$62.2, the biggest drag on the Hang Seng Index. China Life Insurance Company shed 1 per cent to HK$24.5. Ping An Insurance eased 0.4 per cent to HK$79.15.

Gaming stocks pared back some of Wednesday’s gains.

Sands China shed 1.9 per cent to HK$40.55, MGM China fell 1.6 per cent to HK$23.95, and Galaxy Entertainment Group lost 0.4 per cent to HK$60.75.

Banks were mixed, with Bank of China Hong Kong down 2 per cent to HK$39.5, and HSBC Holdings off 0.5 per cent to HK$79.55, while Industrial and Commercial Bank of China gained 0.7 per cent to HK$6.24, and China Construction Bank rose 0.4 per cent to HK$6.96.

Property developers remained buoyant, however. Country Garden Holdings climbed 4.2 per cent to HK$13.32, Sun Hung Kai Properties jumped 3.2 per cent to HK$127.5, and China Overseas Land & Investment advanced 1.3 per cent to HK$24.25.

On Wednesday, the Fed raised interest rates by 25 basis points as markets had widely expected, while lifting its estimate for US economic growth to 2.5 per cent from 2.1 per cent.

The Fed also maintained its forecast for three rate increases each year in the next two years.

Following the move, the Hong Kong Monetary Authority raised the base lending rate by 25 basis points to 1.75 per cent on Thursday, in lockstep with the Fed to maintain the Hong Kong dollar’s peg to the US dollar.

Hong Kong raises base rate by 25 basis points in lockstep with US Fed’s third increase this year

Mainland China markets fell on Thursday after the People’s Bank of China raised market borrowing costs following the Fed’s move, pointing to further increases next year on the back of continued financial deleveraging and rising inflation.

The Shanghai Composite Index ended down 0.3 per cent at 3,292.44. The CSI 300 Index – which tracks the large caps listed in Shanghai and Shenzhen – dropped 0.6 per cent to 4,026.15.

The Shenzhen Composite Index closed practically unchanged at 1,915. The Nasdaq-style ChiNext finished 0.7 per cent lower at 1,794.34.

Brokerage firms were weak, as Huatai Securities moved down 3.6 per cent to 18.25 yuan, Everbright Securities pulled back 2.2 per cent to 14.30 yuan, and Haitong Securities lost 2 per cent to 13.73 yuan.