FX.co ★ Hong Kong Stocks Drop After Fed Rate Hike

The Hang Seng Index fell 1.2%, or about 290 points, to 24,410 on Thursday in a cautious trading session, after the US Federal Reserve raised its benchmark interest rate by 25 basis points to 3.75%–4.00% and signaled the possibility of another increase later this year. The move bolstered the US dollar and pushed US Treasury yields higher, developments that could pressure liquidity and weigh on rate-sensitive Hong Kong equities.

In tandem with the Fed’s decision, the Hong Kong Monetary Authority lifted its base rate by 25 basis points to 4.25%. CICC noted that while renewed US monetary tightening could increase volatility in Hong Kong stocks, the impact is likely to be short-lived unless the Fed embarks on a sustained cycle of rate hikes.

Softer oil prices provided some offset to the cautious mood, as Saudi Arabia took steps to restore capacity at damaged pipelines.

Among major movers, Tencent (-1.4%), AIA (-0.6%) and Xiaomi (-1.2%) declined, while Z.AI Co. (+4.2%), Kingboard Laminates (+4.9%) and Lenovo (+1.9%) advanced.