City market commenced trading with back footing as Wall Street tumbled overnight on disappointment that the U.S. Federal Reserve is unlikely to cut rates again in the near future. Overnight, the Federal Reserve cut rates by 25 basis points in a widely expected move, citing global developments and muted inflation as reasons, but signaled caution on future interest-rate cuts. Some investors are betting on more than one rate cut this year, and while the Fed's policy statement left the door open for the Fed to reduce rates again, Federal Reserve Chairman Jerome Powell suggested Wednesday that this cut wasn't the beginning of a long easing cycle.
The Fed's decision came on the same day as another round of US-China trade talks concluded with few signs of concrete progress. The two sides conducted frank, efficient and constructive in-depth exchanges on major economic and trade issues, according to Chinese media reports. The White House said Wednesday that both sides discussed topics such as forced technology transfer, intellectual property rights, services, non-tariff barriers and agriculture. U.S. and Chinese trade negotiators plan to meet again in early September 2019. U.S. President Donald Trump and Chinese President Xi Jinping reached a truce in June at the G-20 summit in Japan after trade talks collapsed in May that prompted a steep U.S. tariff hike on $200 billion of Chinese goods.
A private survey showed Chinese factory activity contracted in July. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI), a gauge of sentiment among the country's factory operators, came in at 49.9 for July. It followed the Wednesday release of the National Statistics Bureau's official purchasing managers' index (PMI), which slightly rose from June to 49.7 in July. A reading of below 50 indicates that manufacturing output is contracting.
The Hong Kong Monetary Authority responded on Thursday by also cutting its base rate by 25 basis points, to 2.5%, making money cheaper for borrowers in a slowing economy that is showing the wear and tear of the year-long US-China trade war. But HSBC responded by becoming the first of the city's commercial banks to say it will keep its prime rate steady.
Blue chips fell across the board. HSBC (00005) softened 0.5% to HK$63.05. HKEX (00388) edged down 0.4% to HK$264.6. Tencent (00700) rose 0.5% to HK$370. China Mobile (00941) nudged down 0.6% to HK$66.35. AIA (01299) slid 1.5% to HK$79.7.
Shares of property developers tumbled amid Hong Kong's unresolved protests and growing concerns about its economy. Weekly transactions involving used homes fell to their lowest level this year on Sunday, according to one of the city's largest real-estate agencies, while a dozen buyers this month decided against completing contracts for new homes worth more than HK$70 million (US$8.9 million), forfeiting more than HK$3.5 million in deposits and other fees rather than making purchases. Chinese companies listed in Hong Kong struggled as well, still feeling the brunt of the Politburo message earlier in the week that it will not use the property sector as a form of short-term stimulus to boost the economy. Sun Hung Kai lost 4.1% at HK$121.7, CK Asset was down 3.6% at HK$57.2, and CK Hutchison Holdings declined 1.6% to HK$72.5. Country Garden dropped 2.8% to HK$10.38, while China Overseas Land & Investment slipped 1.3% to HK$26.55.
Financials also fell, with insurer AIA down 1.5% at HK$79.7, HSBC down 0.5% at HK$63.05, and Industrial and Commercial Bank of China down 0.9% at HK$5.25.
Powered by Capital Market - Live News