Ping An, Baidu, Tencent push Hong Kong stocks to best week since March on US rate-cut bets amid bank crisis
- Traders have stepped up bets on US rate cuts in recent weeks amid bank failures, slump in regional bank stocks
- Hang Seng logged the biggest weekly gain since end-March; the HKMA has warned investors not to expect lower borrowing costs anytime soon
The Hang Seng Index rose 0.5 per cent to 20,049.31 at the close of Friday trading. This week’s winning of 0.8 per cent is the most since the week ended March 31. The Tech Index jumped 1 per cent while the Shanghai Composite Index declined 0.5 per cent.
Baidu surged 3.8 per cent to HK$119.70 while Ping An Insurance jumped 1.4 per cent to HK$60.05. Tencent rallied 1.5 per cent to HK$342.80 while Alibaba Group climbed 1.2 per cent to HK$81.65. Developer Country Garden increased 5.5 per cent to HK$2.10 and peer Longfor added 2.4 per cent to HK$21.65 on hopes lower borrowing costs will spur home purchases.
Shares of US regional banks crashed further on Thursday as investors dumped PacWest and Western Alliance. Several failures this year, including Silicon Valley Bank and First Republic Bank, have heightened concerns about a liquidity squeeze following the Federal Reserve’s unbroken tightening streak 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.
