Hong Kong stocks extend gains as dovish central banks inspire rate cut hopes

Hong Kong stocks extend gains as dovish central banks inspire rate cut hopes

Hong Kong stocks extend gains as dovish central banks inspire rate cut hopes

Hong Kong stocks gained, amid expectations global central banks will ease monetary conditions this year, with Fed Chair Powell comments about interest rate cuts following those made by PBOC Governor Pan Gongsheng that there is still room to cut banks’ reserve ratio.

The Hang Seng Index jumped 1.1 per cent to 16,402.90 as of 9.50am local time, narrowing the loss this week to 0.9 per cent. The Tech Index strengthened 1.5 per cent and the Shanghai Composite Index added 0.2 per cent.

Tencent gained 0.4 per cent to HK$272.20, Alibaba strengthened 0.8 per cent to HK$71.25 and Meituan added 0.6 per cent to HK$85.95. Sportswear maker Li Ning jumped 3 per cent to HK$19.28 and peer Anta advanced 2.1 per cent to HK$74.35. Wuxi Apptec rose 3.8 per cent to HK$46.70 and Wuxi Biologic gained 2.9 per cent to HK$17.58 to recouping some of its losses on Thursday.

The US central bank “can and will” begin to cut rates this year if the inflation moves sustainably towards the 2 per cent target, Federal Reserve Chair Jerome Powell said on Thursday. The Fed is not far away from getting that confidence and is “well aware” of the risk of cutting too late, he added.

Earlier this week, China’s central bank governor said the PBOC can afford to make further cuts to banks’ reserve requirement ratio (RRR), as the country’s RRR average of 7 per cent is still high compared with peers.

“We think Pan’s statement shows RRR cut remains a potential tool for the PBOC after a 0.5 per cent cut last month,” said analysts at Everbright Securities in a note. “In fact, we think the central bank would still prefer RRR cuts over a cut in policy rates in the near term.”

Despite today’s gain, the city’s benchmark index has retreated 2.2 per cent so far this week, the worst since the beginning week in February as rising geopolitical tensions and lack of substantial fiscal stimulus sapped sentiment.

Other key Asian markets also traded higher after Powell’s dovish speech. South Korea’s Kospi Index jumped 1.2 per cent and Australia’s S&P/ASX 200 gained 0.8 per cent. Japan’s Nikkie 225 added 0.4 per cent.

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