Hong Kong Stocks Plunge Amid Fed Rate Cut Caution

Hong Kong shares tumbled following the U.S. Federal Reserve's caution against aggressive rate cuts next year. This sentiment also impacted China's stock market due to a weak property outlook, leading to a decline in major indices. The drop was exacerbated by low China bond yields and a weak yuan.

Hong Kong shares fell sharply on Thursday after the U.S. Federal Reserve indicated plans to slow the pace of interest rate cuts next year. Weak sentiment in the property sector further dragged down China's stock markets, with both the blue-chip CSI300 Index and the Shanghai Composite Index falling by 0.4% each before the lunch break. Meanwhile, the Hong Kong Hang Seng benchmark experienced a 1.0% decline.

The Hong Kong Monetary Authority responded by cutting its base interest rate, following the Fed's move. However, skepticism about the rate cut potential for 2025 diminished investor interest in Hong Kong equities, noted Kelly Chung, chief investment officer at Value Partners. Additionally, China's currency weakened to 7.3 per dollar, its lowest since November 2023, adding to investor concerns.

In China, Vanke and Sunac shares led the decline in the real estate sector, dropping 3.9% and over 4%, respectively. This was amidst reports that insurers were asked to disclose their debt holdings of Vanke, and Sunac pursued arbitration against Wanda Group. In Hong Kong, tech shares were down 1.3%. Meanwhile, CATL, a Chinese EV battery giant, saw little change in its stock value amid talks of a potential Hong Kong listing.

(With inputs from agencies.)