Hong Kong stocks retreat after US data dampens rate cut hopes; property and banking shares lead declines

Hong Kong stocks slipped amid a global risk-off sentiment after strong US economic data sparked a rise in bond yields as interest rate cut hopes faded. This overshadowed upbeat data which showed China's services activity growth picked up in March as new business rose at the quickest pace in 3 months.

The Hang Seng Index dropped 1.2 per cent to 16,725.10 at the closing of Wednesday trading, after surging 2.4 per cent on Tuesday. The Tech Index lost 2.3 per cent, while the Shanghai Composite Index declined 0.2 per cent.

Shares of banks and property companies, which are sensitive to interest rate changes, were the major decliners. Bank of China (Hong Kong) lost 2.2 per cent to HK$22.45 and Sun Hung Kai Properties declined 2.2 per cent to HK$74.90 and Henderson Land declined 1.3 per cent to HK$22.80. Xiaomi lost 4.4 per cent to HK$15.56, giving up some of Tuesday's 9 per cent gains following the launch of its first electric car.

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BYD slid 2.7 per cent to HK$197 with the car maker losing its crown as the world's biggest EV seller to Tesla amid an intense war at home, while peer Li Auto tumbled 5.2 per cent to HK$117.30.

"It's hard to get a clear read on the liquidity conditions as expectations for rate cuts keep fluctuating," Shen Fanchao, an analyst at Zheshang Securities in Hong Kong said in a note on Wednesday. Hong Kong's monetary policy moves in lock-step with the United States as the city's currency is pegged to the US dollar.

Overnight, US job openings edged up and new orders for factory goods rebounded more than expected. That prompted traders to rein in their interest rate cut expectations. Markets now see a 56 per cent chance of a reduction of interest rates by the US Federal Reserve in its June meeting, down from the 69 per cent chance ahead of the data dump.

Elsewhere, Alibaba jumped as much as 1.2 per cent after the company said it bought back US$4.8 billion worth of its own shares last quarter to protect the stock price. It surrendered all gains later to trade 0.9 per cent lower at HK$70.35.

Other key Asian markets weakened, following the overnight decline on Wall Street. Japan's Nikkei 225 slipped 1 per cent, while South Korea's Kospi lost 1.7 per cent Australia's S&P/ASX 200 weakened 1.3 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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