Ping An, Baidu, Tencent push Hong Kong stocks to best week since March on US rate-cut bets amid bank crisis

Hong Kong stocks advanced, set for the biggest weekly gain since March, as traders stepped up bets on interest-rate cuts amid growing concerns about US bank failures and recession risks.

The Hang Seng Index rose 0.6 per cent to 20,076.91 at the local noon trading break. This week's winnng of almost 1 per cent is the most since a 2.4 per cent gain since the March 31 week. The Tech Index jumped 1.6 per cent while the Shanghai Composite Index declined 0.7 per cent.

Baidu surged 4.7 per cent to HK$120.70 while Ping An Insurance jumped 1.4 per cent to HK$60.05. Tencent rallied 4.8 per cent to HK$342.60 while Alibaba Group climbed 1.6 per cent to HK$82. Developer Country Garden increased 5.5 per cent to HK$2.10 and peer Longfor added 3.1 per cent to HK$21.80.

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Shares of US regional banks crashed further overnight as investors dumped PacWest and Western Alliance, roiling Wall Street. Several failures this year, including Silicon Valley Bank and First Republic Bank, have heightened concerns about a liquidity squeeze following the Federal Reserve's tightening since March last year.

"Investors are not pricing in what they believe the Fed is thinking but what they believe the Fed will be forced to do," Frances Donald, global chief economist and strategist for multi-asset solutions at Manulife Investment, said in a note. "Indeed, the modal case is that the Fed will have had to cut four times (or 100 bps) by the end of January 2024."

Fed fund futures showed the odds for at least a quarter-point cut in September's policy meeting have risen to 90 per cent, versus 62 per cent a week ago, according to data compiled by CME Group. The Fed is almost certain to cut in November, contracts showed.

Limiting Gains, HSBC fell 0.8 per cent to HK$58.20 and HKEX slipped 0.9 per cent to HK$319. Macau casino operators tumbled, with Sands China losing 1.3 per cent to HK$26.80 and Galaxy dropping 1.6 per cent to HK$53.85.

"Many traders expect that the rate cut will happen in September, but it's too aggressive and they may be disappointed," said Kenny Wen, head of investment strategy based in Hong Kong at KGI Securities. "The market focus will gradually turns from inflation to recession."

Two companies began trading today. Nexchip Semiconductor rose 0.1 per cent to 19.87 yuan in Shanghai. Sanbo Hospital Management jumped 83 per cent to 54.28 yuan in Shenzhen.

Major Asian stock indices were little changed. The Kospi in South Korea and the S&P/ASX 200 in Australia added 0.3 per cent while financial markets in Japan are closed for a public holiday.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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