China, Hong Kong stocks drop on hawkish US Fed stance

HONG KONG: China and Hong Kong stocks slipped on Thursday as risk sentiment took a blow after the US Federal Reserve’s hawkish policy statements signalled another rate hike by year-end and much tighter monetary policy through 2024 than previously expected.

** China’s blue-chip CSI 300 Index declined 0.61% while the Shanghai Composite Index slid 0.59%.

** Hong Kong’s Hang Seng Index fell 1.31%, while the Hang Seng China Enterprises Index dropped 1.38%.

** Asian stocks followed Wall Street’s lacklustre lead, dipping across the board as the tough message from the US Fed pressured markets.

** The Fed held interest rates steady on Wednesday, but stiffened a hawkish monetary policy stance.

** The US central bank raised its end-2024 and 2025 dot plot projections by 50bp each, essentially signalling “higher-for-longer” rates, Nomura analysts said in a note.

** “Rising US bond yields, stronger USD and elevated energy prices – all are ingredients for a bad recipe for Asian stocks,” Nomura said.

** The reaction from the US equity markets to the Fed’s decision was bearish and opened the door for follow-up sell-offs, said Redmond Wong, Greater China market strategist at Saxo Markets.

** “This development in the US market weighed down the already cautious sentiment in the Hong Kong and mainland markets,” he said.

** Meanwhile, to restore market confidence, China pledged to speed up the introduction of more policies to consolidate its economic recovery, state media CCTV reported on Wednesday, citing a cabinet meeting chaired by Premier Li Qiang.

** Big tech firms listed in Hong Kong fell 2.2%, with both Tencent and Alibaba losing 2%.

** Shares of Country Garden climbed 1% after the embattled Chinese giant said it has won approval from creditors to extend repayment of seven bonds as of Sept. 12.