Hong Kong stocks rise on Fed decision, led by banks and insurers, as China’s policy support lifts sentiment

Hong Kong stocks rose on Thursday driven by gains in the banking sector and in insurance companies after the US Federal Reserve signalled it would wait longer before cutting interest rates, while the overall sentiment remained upbeat following Beijing’s recent efforts to prop up stocks.

The Hang Seng Index rose 2.2 per cent to 18,155 at the noon trading break. The benchmark has risen about 20 per cent from a January low and is on the cusp of what is defined as bull-market territory. The Hang Seng Tech Index rose 1.5 per cent, while China’s onshore stock exchanges are closed for the week.

HSBC, the city’s biggest bank, rose as much as 3.3 per cent but ended the moring up 2.4 per cent to HK$68.60. Index heavyweight and tech giant Tencent rose 3.6 per cent to HK$359.80. Insurance stocks were also higher, with AIA rising 2.2 per cent and Ping An advancing 3.5 per cent to their respective peaks for the day.

Pedestrians walk past the logo for HSBC outside a local branch bank in Hong Kong. Photo: AFP

“Banks and insurance companies benefit from higher interest margins when rates are elevated,” said Nitin Dialdas, CIO at Mandarin Capital, who added that investment flows in the broad market were being driven by Beijing’s economic focus at a time when stock market valuations are cheap. “A shift is taking place from west to east,” he said.

The Hong Kong Monetary Authority (HKMA) said on Thursday it would leave its base rate unchanged at 5.75 per cent, hours after the Fed kept interest rates steady, as expected, while citing several “hotter-than-expected” price and growth reports. The HKMA has followed the Fed’s rate decision in lockstep since 1983 by design under its linked exchange rate system to preserve the local currency’s peg to the US dollar.

Hong Kong keeps rate at 5.75% as Fed watches over US inflation

“The good news was that the Fed does not appear to be leaning towards a potential hike, despite a run of stronger macro indicators, including some which measure inflation,” said Tim Waterer, chief market analyst at Kohle Capital Markets.

Foreign investors loaded up on Chinese stocks for a third straight month in April, after China’s economy exhibited more signs of stabilising and regulators ramped up policy support the world’s second-largest market.

Other major Asian markets were mixed. Japan’s Nikkei 225 was flat and Australia’s S&P/ASX 200 rose 0.45 per cent. South Korea’s Kospi was 0.2 per cent lower.

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