HONG KONG: China and Hong Kong stocks slipped further on Thursday as risk sentiment was hit after the US Federal Reserve 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 0.9% to close at its lowest since November 2022, while Hong Kong’s Hang Seng Index fell 1.3%.
Asian stocks followed Wall Street’s lacklustre lead, dipping across the board as the Fed stiffened its hawkish monetary policy stance, pressuring markets.
The Fed held interest rates steady, as expected, on Wednesday. But it raised its end-2024 and 2025 dot plot projections by 50 bps 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. Chinese regulators have started to probe some hedge funds and brokerages on quantitative trading strategies amid a growing outcry against a sector able to profit from share price falls and volatility, sources told.
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