Hong Kong Market gains on trade truce hopes, Fed rate cut signals

Headline indices of the Hong Kong share market advanced on Wednesday, 19 June 2019, following Wall Street's rally overnight and surge in Mainland A-share market today after the U.S. Federal Reserve opened the door to rate cuts on the horizon and growing hopes for a trade deal between the two economic powerhouses as U.S. President Donald Trump and Chinese Xi Jinping are set to meet at the upcoming G-20 summit in Japan, which will happen next week. At closing bell, the Hang Seng Index surged 1.23%, or 348.29 points, to 28,550.43. The Hang Seng China Enterprises Index was up 1.46%, or 157.69 points, to 10,922.39.

The US share market climbed for a third day on Wednesday, after the Fed left interest rates unchanged at its monetary policy meeting, dropped the word patient from its statement and said it would act as appropriate to sustain the economy. Overnight on Wall Street, the Dow Jones Industrial Average added 38.46 points to close at 26,504, while the S&P 500 rose 0.3% to finish its trading day stateside at 2,926.46. The Nasdaq Composite advanced 0.4% to close at 7,987.32.

 

The Federal Reserve signaled potential interest cuts later this year, reassuring investors worried that the US-China trade war could stall economic growth. Saying it will act as appropriate to sustain economic expansion, the central bank signaled rate cuts of as much as half a%age point over the remainder of 2019. In its statement following a two-day policy meeting, the Fed held rates steady, as expected, but dropped a previous promise to be patient in adjusting rates. The central bank remained mostly optimistic about the economic outlook, but said inflationary pressures have receded, compelling it to lower its forecast for PCE inflation in 2019 to 1.5% from 1.8%, below its 2% target. At the same time, it left its gross domestic product estimate at 2.1%. Meanwhile, the Federal Open Market Committee's dot plot of likely federal funds rate changes shows one rate cut next year and one hike in 2021 but there was a wide range of forecasts around that median.

Meanwhile, on the U.S.-China trade front, hopes in Beijing appear to have risen for a trade deal between the two economic powerhouses. U.S. President Donald Trump and Chinese Xi Jinping are set to meet at the upcoming G-20 summit in Japan, which will happen next week. Trump said talks between the respective teams would begin prior to that.

Cosmetics store chain Sa Sa International Holdings (178 HK) soared by 10 per cent to HK$2.43 in Hong Kong, after reporting better-than-expected annual results. Net profit for the year ended on March 31 rose 7 per cent to HK$471 million.Retail sales increased by 19 per cent in the first half of the financial year and 28 per cent in the second half.

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