Hong Kong shares fall after Fed signals slower easing next year

Name: SCMP
Telephone: +852-2680-8888

Federal Reserve’s hawkish forecast for just two rate cuts next year dampens sentiment

Reading Time:2 minutes

Why you can trust SCMP

Markets in the US and Asia fell after Federal Reserve chairman Jerome Powell hinted at a slower pace of rate cuts next year. Photo: Reuters

Yulu Ao

Published: 10:28am, 19 Dec 2024Updated: 12:38pm, 19 Dec 2024

Hong Kong stocks fell following the US Federal Reserve’s unexpected hawkish forecast for interest rate cuts next year.

The Hang Seng Index declined 1 per cent to 19,666.12 at the noon break on Thursday, erasing the previous day’s gains. The Hang Seng Tech Index retreated 1.3 per cent. On the mainland, the CSI 300 Index slid 0.4 per cent and the Shanghai Composite Index declined 0.7 per cent.

The Hong Kong Monetary Authority, the city’s de facto central bank, cut its base rate by a quarter point to 4.75 per cent, the lowest level since December 2022, following the Fed’s widely expected action overnight. However, the mood was dampened as the Fed forecast only two more reductions next year.

Fed chairman Jerome Powell said the slower pace of rate cuts reflects both the current inflation and expectations of higher inflation next year. The adjusted forward-guidance language in the Fed’s policy statement said that it was “considering the extent and timing of additional adjustments”, which indicated a possible pause on rate cuts at the next meeting in January.

The Fed has entered “the pause phase” of its monetary policy, said Jack McIntyre, portfolio manager at US investment firm Brandywine Global. “The longer it persists, the more likely the markets will have to equally price a rate hike versus a rate cut. Policy uncertainty will make for more volatile financial markets in 2025.”

All but 11 stocks from the 83-member Hang Seng Index fell. Among the major decliners, Hong Kong property developer Henderson Land shed 3.5 per cent to HK$23.25, while peer Sun Hung Kai Properties lost 2.6 per cent to HK$72.00 and Hang Lung Properties retreated 2.9 per cent to HK$6.13.