Hong Kong stocks enter bull market: banks, insurers gain after Fed rate decision as China’s policy support adds to cheer

The Hong Kong Monetary Authority (HKMA) left its base rate unchanged at 5.75 per cent, hours after the Fed kept interest rates steady
HSBC, the city’s biggest bank, rose as much as 3.4 per cent, and insurance stocks AIA and Ping An also advanced

Banking & finance

SCMP

Published: 11:12am, 2 May 2024

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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 2.5 per cent to end the day at 18,207.13. The benchmark has risen 20 per cent from a January low and has now entered what is defined as bull-market territory. The Hang Seng Tech Index rose 4.45 per cent, while China’s onshore stock exchanges are closed for the week.

HSBC, the city’s biggest bank, rose 3.4 per cent to HK$69.25. Index heavyweight and tech giant Tencent rose 3.8 per cent to HK$360.40. Insurance stocks were also higher, with AIA rising 2.7 per cent to HK$59.35 and Ping An advancing 5.7 per cent HK$38.

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.

US Federal Reserve Chair Jerome Powell said it was “likely that gaining such greater confidence [about inflation moving sustainably toward 2 per cent] will take longer than previously expected”.

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 for the world’s second-largest market.

Other major Asian markets were little changed. Japan’s Nikkei 225 edged down 0.1 per cent, and Australia’s S&P/ASX 200 rose 0.23 per cent. South Korea’s Kospi closed 0.31 per cent lower.