SHANGHAI/SINGAPORE: Mainland China and Hong Kong stocks rose for a third consecutive session on Wednesday, with the Shanghai benchmark hitting a more than 3-1/2-year high, as prospects of a Federal Reserve interest rate cut next month lifted investor sentiment.
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At the midday break, the Shanghai Composite index was up 0.56% after hitting the highest level since December 13, 2021 in morning trade.
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China’s blue-chip CSI300 index climbed 0.92%.
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In Hong Kong, the Hang Seng Index rose 1.88%.
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Expectations have firmed for a Fed rate cut in September after the US consumer inflation report indicated the pass-through from President Donald Trump’s sweeping tariffs to goods prices has so far been limited.
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With rising expectations of a Fed rate cut, risk appetite improved and “emerging and developed equity markets resonated,” analysts at Guoyuan Securities said in a note.
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The MSCI All Country World Index hit an all-time high.
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Lifting market sentiment further, China said it will offer interest subsidies for businesses in eight consumer service sectors to support services consumption amid a slowing economy.
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“China retains the fiscal firepower to stimulate growth and absorb slack from reduced exports should tariffs from the US be punitive,” said Vivek Bhutoria, portfolio manager for global emerging market equities at Federated Hermes.
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“We believe the market has been over-discounting risks in relation to Chinese equities, and even if Trump levies punitive tariffs this week, China has the ability to grow its way to prosperity and, as such, as we are still positive on China.”
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China’s A shares have been trending higher in recent weeks, as investors priced in positive signals from a series of US-China trade talks.
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US trade officials will meet again with their Chinese counterparts within the next two or three months to discuss the future of the economic relationship between the two countries, Treasury Secretary Scott Bessent said on Tuesday. Reuters
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