Hong Kong stocks rise after interest rate cut; China mixed

Hong Kong stocks gained on Thursday after the island city's central bank cut interest rates, mirroring the U.S. Federal Reserve's rate-cut announcement on Wednesday. The Hang Seng index added 1.1%, to 26,949.08, while the Hong Kong China Enterprises Index gained 0.6%, to 10,539.86. 

The Hong Kong Monetary Authority (HKMA) lowered its policy rate by 25 basis points to 2% on Thursday, following U.S. central bank's move to cut rates for the third time this year. The city's policy moves lock-step with the United States as its currency is pegged to the greenback at 7.75-7.85 per dollar.

The head of Hong Kong's central bank called on the public to manage financial risks prudently on Thursday, as the local economy faces its first recession in a decade.  The island city recently rolled out policies to underpin the faltering growth, including cutting banks' capital buffer and supportive measures for small businesses, and is expected to do more amid the months-long protests.

 Meanwhile, the Trump administration still expects to sign an initial trade agreement with China next month despite the cancellation of the APEC summit in Chile where officials had hoped to finalize the pact, the White House said on Wednesday. Chinese officials voiced optimism that Beijing and Washington can find a way to clinch the so-called Phase One trade deal next month.

In China, data showed factory activity shrank for the sixth straight month in October and by more than expected, raising hopes of more stimulus to bolster the economy amid a bruising trade war.  "The official PMIs fell by more than expected this month, reinforcing our view that the improvement at the end of Q3 didn't mark the start of a sustained recovery," said Julian Evans-Pritchard, senior China economist at Capital Economics.

Mainland stocks were mixed after the data on Thursday. The CSI300 index rose 0.1%, to 3,894.62 on Thursday morning, while the Shanghai Composite Index lost 0.1%, to 2,936.64.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.68% while Japan's Nikkei index was up 0.36%. The yuan was quoted at 7.0415 per U.S. dollar, 0.21% firmer than the previous close of 7.056.

So far this year, the Shanghai stock index is up 17.86%, while China's H-share index is up 3.5%. Shanghai stocks have risen 1.17% this month. As of 04:06 GMT, China's A-shares were trading at a premium of 29.86% over the Hong Kong-listed H-shares.

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