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Fed Rate Hike Drags Hong Kong Equities Lower as Further Tightening Looms
Hong Kong and mainland Chinese stocks declined following the Federal Reserve's decision to raise interest rates for the first time in three years. The Fed's updated 'dot plot' signals another rate hike before year-end, impacting investor sentiment.…
Hong Kong and mainland Chinese equities fell on Thursday after the US Federal Reserve implemented its first interest rate increase in three years, signaling that additional tightening remains possible. The benchmark Hang Seng Index dropped 0.8 percent to 24,537.30 by 9:30 AM local time, while the Hang Seng Tech Index saw a 0.5 percent loss. Concurrently, mainland markets also softened, with the CSI 300 Index shedding 0.2 percent; the Star Market 50 index, which is heavily weighted towards chipmakers, recorded little change.
The Fed's September policy meeting concluded with a 0.25 percentage point increase, setting the benchmark interest rate to a target range of 3.75 percent to 4 percent. This move aligns with Chair Kevin Warsh's stated goal of returning inflation to 2 percent and bolstering the central bank's credibility. The updated 'dot plot,' which outlines the US central bank's monetary policy trajectory, indicated the likelihood of one more rate hike before the end of the year.
Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong, noted that without immediate signs of inflation easing, the Fed is likely to continue tightening to achieve its target. Hui suggested that strong growth and elevated rates could favor financial, consumer discretionary, and industrial sectors. Despite some caution around model development, he anticipates sustained demand expansion to benefit Asian technology firms.
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