Hong Kong stocks surge on tech-powered rally as Fed calms nerves about inflation, lift-off outlook

·2-min read

Hong Kong stocks logged their best gain in almost three months after the Federal Reserve said inflation pressure will recede, allaying market concerns about a sooner-than-expected withdrawal of monetary stimulus.

The Hang Seng Index surged 1.8 per cent to 28,817.07 at the close on Wednesday, marking the biggest advance since April 1 when the benchmark climbed 2 per cent. The Shanghai Composite Index gained 0.3 per cent.

Sunny Optical and Geely Automobile topped the list of gainers, each rising by more than 5 per cent. Tech stocks soared 2.7 per cent in the sector’s best performance in six weeks as Meituan, Hua Hong Semiconductor and Kuaishou Technology rallied.

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While recent US inflation was faster than expected, the pace will ease and the Fed championed patience when considering higher borrowing costs, Chair Jerome Powell said in a testimony to Congress on Tuesday. That followed the Fed’s projection of a “lift-off” in interest rates by the end of 2023.

“Powell’s testimony calmed financial market worries over runaway inflation triggering a quicker removal of stimulus and assuaged investor concerns over a sooner-than-expected taper,” said Edward Moya, an analyst at Oanda.

Earlier on Tuesday, New York Fed President John Williams noted that a discussion about raising interest rates is still “way off in the future.” His Cleveland Fed counterpart Loretta Mester preferred to see further improvement in employment for several more months before assessing the need for tapering of bond purchases.

“We believe the Fed’s new outlook will not translate into significantly higher policy rates any time soon,” strategists at BlackRock said in a June 21 report. The market is getting ahead of itself by baking in three rate increases in 2023, they added.

Markets in Asia-Pacific were, however mixed, as benchmarks South Korea advanced while those in Japan and Australia marked small losses.

Stocks in Hong Kong fell earlier this week to the lowest since mid-May while global equities wavered after the Fed projected a lift-off in US interest rates by the end of 2023, prompting rate traders to build in more tightening before 2024.

Suzhou Nanomicro Technology surged almost 14 folds from the initial public offering price to 90.18 yuan on Shanghai’s Star Market, delivering the best return among three mainland market debutants today. China Chippacking Technology surged 387 per cent and Shandong Link Science and Technology added 44 per cent.

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