Hong Kong stocks fell to a six-month low on concern the Federal Reserve will push ahead with its fifth interest-rate increase this year to control inflation at the risk of pushing the global economy into a recession. Analysts expected China’s commercial banks to keep the loan-prime rates unchanged this month.
The Hang Seng Index dropped 1 per cent to 18,580.87 at the noon break, heading for its lowest close since March 15. The Tech Index slumped 2 per cent, while the Shanghai Composite Index lost 0.2 per cent.
Alibaba Group Holding slumped 3.4 per cent to HK$83.85, while Tencent Holdings lost 0.9 per cent to HK$290.60. Other big losers include WuXi Biologics, which tumbled 5.1 per cent to HK$49.20, and developer Country Garden, which retreated 5 per cent to HK$2.30.
The Fed will lift benchmark borrowing costs by at least 75 basis points at its policy meeting this week, according to Fed funds futures, with some traders pricing a full percentage point increase. Policymakers have so far raised a total of 225 basis points in the past four open-market committee meetings this year.
“Market sentiment is now clearly under pressure as worries are growing among investors that the Fed will be heavy-handed in raising interest rates,” said Liu Gu, an analyst at Guotai Junan Securities in Hong Kong. “Hong Kong stocks will have to follow the weak pattern on overseas markets.”
Two-year US government bond yields are at about 3.87 per cent, the highest level since 2007, while 10-year notes fetched about 3.45 per cent, steepening the curve inversion which typically signals an imminent recession. US equities fell last week in their worst performance since June, with the S&P 500 index losing almost 5 per cent.
China’s commercial lenders will probably leave both the one-year and the five-year loan primate rates unchanged for September on Tuesday. The one-year rate will stay at 3.65 per cent and the five-year rate will be at 4.30 per cent, according to the estimate of economists tracked by Bloomberg.
Elsewhere, Fosun International added 0.4 per cent to HK$4.98, reversing a loss of as much as 2.6 per cent, after the diversified group’s credit rating was cut to BB- by S&P Global Ratings amid concerns about its finances. Its unit Fosun Pharma declined 1.5 per cent to HK$20.10, and Fosun Tourism weakened 0.1 per cent to HK$7.11.
Limiting losses, China lifted a two-week lockdown of Chengdu, the southwest city of 21 million in Sichuan province starting Monday, allowing residents to leave homes and return to work. They are still required to take nucleic acid tests once a week, among other rules imposed by the local government.
Five companies started trading on the mainland’s exchanges on Monday, with two rising and three declining. Dabond Technology, a producer of integrated circuit packaging materials, jumped 66 per cent to 76.35 yuan in Shanghai as the best performer, while Zhejiang Power New Energy, which makes chemicals for lithium batteries, tumbled 19 per cent to 41.86 yuan for the biggest decline.
Other major markets in the region were generally weak, as South Korea’s Kospi slid 1 per cent and Australia’s benchmark slipped 0.1 per cent. Japan’s market is shut for a public holiday.