Hong Kong stocks advance as city removes all travel restrictions ahead of US inflation data, Fed rate decision

Hong Kong stocks rose after the city removed all restrictions on inbound travellers by allowing them access to public venues up on arrivals. A US report that is expected to show that inflation slowed last month also buoyed sentiment.

The Hang Seng Index climbed 0.7 per cent to 19,596.20 at the close. The Hang Seng Tech Index rose by the same amount and the Shanghai Composite Index slipped 0.1 per cent.

Meituan gained 2.1 per cent to HK$179, and Tencent advanced 0.3 per cent to HK$318.40. Macau casino operator Sands China rose 4.3 per cent to HK$26.55, and Galaxy Entertainment added 2.4 per cent to HK$52.60. Chip maker Semiconductor Manufacturing International Corp surged 9.7 per cent to HK$18.18 on a media report that China is working on a 1 trillion yuan (US$143.3 billion) package to support the industry. Guangzhou R&F Properties tumbled 12 per cent to HK$2.15 after founder Zhang Li was arrested in London for offering bribes to secure a contract in the US for affiliate Z&L Properties.

Starting Wednesday, Hong Kong will scrap an amber health code that currently bans travellers who test negative from entering certain places of business, such as restaurants, within three days of arriving in the city, Chief Executive John Lee Ka-chiu said on Tuesday.

Expectations that decelerating US inflation will bolster the case for the Federal Reserve to roll back interest-rate increases also buoyed sentiment. American consumer prices probably rose 7.3 per cent in November, slowing from a 7.7 per cent increase a month earlier, according to the estimates of economists tracked by Bloomberg.

The Fed is widely expected to raise benchmark borrowing costs by 50 basis points in its rate-decision meeting on Thursday, halting a run of four straight 75-basis-point increases. Among the 105 economist polled by Bloomberg, all but one predict an increase by 50 basis points after Fed Chair Jerome Powell pivoted to a dovish tone in early December.

“The [inflation] reading should be vital to setting the tone for Powell’s press conference since the current rate hike cycle is inflation-driven,” said Stephen Innes, a managing partner at SPI Asset Management. “The downdraft we have seen in equities for over a week has given way, at least for now, to optimism around the debate about whether the Fed can engineer an economic soft landing.”

Gains were limited as investors remain cautious about the strength of China’s recovery from the damage of the pandemic. New yuan loan growth trailed analysts’ projections in November, according to the data by the central bank, underscoring sluggish demand for corporate lending on the lack of confidence in re-investments.

Investors are also keeping a close watch on the Covid situation in China, where new infections have surged in Beijing to overwhelm hospitals with patients after the faster-than-expected dismantling of pandemic-containment measures.

Terence Energy Equipment, which makes natural gas equipment and parts, slumped 6.7 per cent to 15.10 yuan on its first day of trading in Beijing.

Other major Asian markets were mixed. Japan’s Nikkei 225 climbed 0.4 per cent per cent and Australia’s S&P/ASX 200 added 0.3 per cent, while South Korea’s Kospi retreated less than 0.1 per cent.