Tech stocks climb in Hong Kong while Asian markets languish as investors fret about Fed policy outlook, recession

  • Chinese stocks are burnishing their appeal as a shelter from global weakness as Fed tightening stokes recession concerns
  • Hang Seng Index has recouped 14 per cent of value since the mid-March mayhem as traders bet on China policy support

Hong Kong advanced, bucking a sell-off in key Asian markets, on optimism monetary easing and fiscal stimulus will shield the local markets while investors fret about risk of hard landing caused by policy tightening in the US.

The Hang Seng Index rose 0.8 per cent to 21,009.00 at the local noon trading break, while the Tech Index climbed 1.4 per cent. Friday’s gains helped narrow declines for the week. The Shanghai Composite Index was little changed.

JD.com rose 4.3 per cent to HK$256.80, while Meituan strengthened 3.4 per cent to HK$195.60. China Resources Beer added 2.5 per cent to HK$48.95 and AIA Group gained 2.3 per cent to HK$79.45. Haidilao and Geely Auto appreciated at least 2.9 per cent.

Markets in Asia-Pacific languished. Benchmarks in Japan, South Korea and Australia slumped by 0.7 to 2 per cent. The broader market surrendered all gain in the post-Fed rally on Thursday, as some global fund managers raised concerns about recession.

“Global growth momentum will shift from the US to China and the developing world as China reopens and deploys extremely stimulative macro policy while the Fed is tightening,” strategists at Alpine Macro said. “Watch for a revival in China’s credit cycle, increase in infrastructure spending, and rebound in the housing sector where peak stress is passing.”

The Federal Reserve boosted its key rate by 75 basis points at its June 15 meeting, the biggest rate hike since 1994. That followed a combined 75 basis points in the two preceding meetings. Global equities slipped into bear territory earlier this week, with investors still divided if further increases this year will tip the global economy into a recession.

Global stocks suffered its worst week since the depth of Covid-19 pandemic in March 2020, with the Swiss central bank delivering a shock 50 basis points hike. US Treasury yields have spiked along with inflation in the run-up to the Fed decision, with curve inversion channelling recession signals.

In contrast, Chinese stocks are burnishing its status as a safe harbour from global rout. Foreign investors have bought more Chinese stocks on valuations appeal. The Hang Seng Index has rebounded 14 per cent since hitting a multi-year low following a sell-off on March 15 as Goldman Sachs said the worst is over.

Still, the Hang Seng Index is still 3.6 per cent weaker for the week, set to halt a two-week winning streak. Hong Kong saw virus cases climbed above 1,000 for the first time since March, while Finance chief Paul Chan also cautioned about capital flight.

“[We are still] a little negative on Hong Kong stocks. Although we see recovery, but with the US interest rates hikes we do not see light at the end of the tunnel yet and that could affect the city’s mortgage rates, spending attitudes and retail,” said Paul Pong Po-lam, managing director of Pegasus Fund Managers.

Three companies traded for the first time on mainland bourses. Jiangsu Ruitai New Energy Materials soared 77 per cent on its first day of trading in Shenzhen, while Shanghai Menon Animal Nutrition Technology Company jumped 58 per cent. Shaanxi Tirain Science&Technology Company slipped 8 per cent in Beijing.

Author: Cheryl Heng, SCMP

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