Hong Kong stocks weakened after a private report showed China’s manufacturing activity unexpectedly contracted in July, reigniting growth concerns. The Federal Reserve’s dovish outlook, after leaving interest rates unchanged overnight, failed to boost market sentiment as investors expect Hong Kong authorities to start cutting rates only in 2025.
The Hang Seng Index declined 0.3 per cent to 17,290.03 as of 11am local time, after gaining 2 per cent gain on Wednesday. The Tech Index lost 1.18 per cent.
E-commerce platform operator JD.com lost 4 per cent to HK$99.50, game developer NetEase lost 1.7 per cent to HK$143.70 and search engine operator Baidu lost 2.3 per cent to HK$85.70. Budweiser Brewing tumbled 2.2 per cent to HK$9.3 after reporting a 5.9 per cent earnings decline.
The Caixin/S&P Global manufacturing PMI contracted to 49.8 in July from 51.8 the previous month, missing analysts’ forecasts of 51.5. That reinforced concerns about China’s economic slowdown, with the official PMI manufacturing index released on Wednesday dropping to 49.4 from 49.5 in June. The 50-point mark separates growth from contraction.
“The most prominent issues are still insufficient effective domestic demand and weak market optimism,” Wang Zhe, senior economist at Caixin Insight Group said. “Therefore, policy efforts should focus on stabilising growth, improving employment, safeguarding people’s livelihoods, intensifying policy stimulus, ensuring effective implementation of previous policies, and unleashing market vitality.”
The Hang Seng Index has declined for two straight months through July, as Beijing’s policy response underwhelmed, providing only well-telegraphed, long-term development plans, while economic fundamentals remained murky.
Hong Kong Monetary Authority, the city’s de facto central bank, left the base rate unchanged at 5.75 per cent, after the US Federal Reserve maintained its target rate in the 5.25 per cent to 5.5 per cent range overnight.
“There is no pressure for Hong Kong’s [commercial] banks to move in tandem with a US rate cut,” said Ryan Lam Chun-wang, Hong Kong head of research at Shanghai Commercial Bank. “The first time for Hong Kong lenders to cut their prime rate may be in mid 2025.”
Markets are now pricing in a 67 per cent chance that the Fed will cut rates three times this year in September, November and December, according to CME FedWatch.
Elsewhere, Shenzhen Boshijie Technology, an intelligent hardware maker, surged 106 per cent from its IPO price to 91.88 yuan per share on its first day of trading in Shenzhen.
Other Asian markets showed a mixed trend on Thursday. Japan’s Nikkei 225 slid 3 per cent, South Korea’s Kospi added 0.2 per cent and Australia’s S&P/ASX 200 gained 0.4 per cent.