Hong Kong stocks tumble on China deflation concerns, reduced US rate cut expectations

The Hang Seng Index fell 1.3 per cent to 16,925.09 as of 9.45am local time. The Hang Seng Tech Index slid 1.6 per cent and the Shanghai Composite Index retreated 0.3 per cent.

Hong Kong’s property sector posted losses across the board on concerns borrowing costs will remain elevated for longer. New World Development dropped almost 4 per cent to HK$8.49 and Sun Hung Kai Properties slid 2.5 per cent to HK$73.45. Among other prominent decliners, NetEase shed 3.1 per cent to HK$153.90 and China Life Insurance slid 2.4 per cent to HK$9.14.

“China still faces the risk of deflation, as domestic demand remains weak,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The property sector slowdown continued in March. Fiscal spending has been weak so far this year. Export growth by itself cannot boost aggregate macro activities without help from more supportive fiscal policy.”

Sentiment also took a beating as investors adjusted their expectations of interest rate cuts by the US Federal Reserve. The odds for a rate cut at its June meeting have now fallen to less than 20 per cent from 56 per cent before the US inflation data exceeded consensus expectations.

“We are pushing back our forecast of the first rate cut from June to July. We continue to expect cuts at a quarterly pace after that, which now implies two cuts in 2024 in July and November,” said Goldman Sachs analysts in a note.

Brite Semiconductor, which makes integrated circuits, jumped 33 per cent from its initial public offering price to 52.70 yuan in Shanghai.

Other major Asian markets fell across the board as investors reined in their US rate cut bets. Japan’s Nikkei 225 and Australia’s S&P/ASX 200 both slipped 0.8 per cent, while South Korea’s Kospi retreated 0.5 per cent