21/09/2017 09:31 AST
China and Hong Kong shares rose on Thursday, bucking regional weakness, as revived expectations of another U.S. rate increase later this year boosted financial stocks, offseting profit takig in high-flying commodity plays.
The Fed on Wednesday said it would start to shrink its massive balance sheet next month and signalled one more rate hike later this year. For months, markets had been steadily dialing back expectations of a third rise in 2017.
China’s blue-chip CSI300 index rose 0.3 percent to 3,853.74 points by the lunch break, while the Shanghai Composite Index gained 0.2 percent to 3,372.94.
In Hong Kong, the Hang Seng index edged up 0.1 percent to 28,155.00, while the Hong Kong China Enterprises Index gained 0.6 percent to 11,235.68.
Financial stocks were strong in both China and Hong Kong on prospects of higher rates, rising 0.8 percent, and 0.4 percent, respectively.
The Fed’s tightening move “would have limited impact on the market in the short term, but over the long term, it would be gradually felt,” Cheng Shi, an economist at ICBC International Holdings, wrote in a research note, pointing out the Fed’s pace of shrinking its balance sheet could accelerate in the second half of 2019.
“If the markets fail to price in this policy shift, or under-estimate its impact, then, risk appetite will be dealt blows, repeatedly.”
In an apparent effort to warn the markets against potential risks, Hong Kong’s de facto central bank said on Thursday the Fed’s tightening plan may lead to capital outflows from the Asian financial hub.
Commodity stocks were hit hard on Thursday as the dollar strengthened on the Fed announcement and investors took profits from this year’s sharp gains.
An index tracking China-listed resources shares dropped over 1 percent, while the non-ferrous metal sector lost over 2 percent
Reuters
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