HSBC and BoC Pass On Smaller Rate Cut After HKMA Lowers Base Rate by 50 Basis Points

Li Chen
19 Sep, 2024
Hong Kong

Stocks in Hong Kong rebounded after investors returned from a holiday, and the Hong Kong Monetary Authority lowered its base rate, reflecting the move by the U.S. Federal Reserve. 

The Hang Seng index jumped nearly 2% and the mainland-focused CSI 300 index advanced nearly 1%. 

The U.S. Federal Reserve lowered its key lending rate for the first time since March, with an aggressive cut of 50 basis points to between 4.75% and 5.0%. 

The Fed's latest move indicated that policymakers feel confident about the inflation trajectory towards the target rate of 2%. 

However, most of the decline in inflation in 2024 reflects the weakening of crude oil prices and imported goods from Asia, which is struggling with manufacturing overcapacity. 

The Hong Kong Monetary Authority lowered its base rate by 50 basis points to 5.25%, following the Fed's move to maintain the Hong Kong dollar's parity with the U.S. dollar. 

Still, market indexes in China and Hong Kong are down in September amid a weak earnings growth outlook and the protracted property market crisis that shows no end in sight. 

Moreover, the latest batch of economic data for August, from retail sales to fixed investment and industrial output, missed expectations set by economists. 

 

China Stock Movers 

The Hang Seng index soared 1.8% to 17,978.83, and the mainland-focused CSI 300 index gained 0.6% to 3,196.35. 

Property stocks advanced for the second day in a row after the HKMA lowered its lending rate by half a point. 

China Resources Land jumped 9.3% to HK $21.10, China Vanke gained 8.2% to HK $4.24, Longfor Group added 7.2% to HK $8.55, and Henderson Land added 2.2% to HK $24.85. 

Tech stocks participated in the market rally in Hong Kong following the easing of interest rates because the lower rate increases the current value of the future earnings stream. 

Alibaba Group added 3.4% to HK $85.65, Tencent Holdings advanced 2.4% to HK $389.0, and the Meituan jumped 3.7% to HK $133.30. 

Banks were in focus after HSBC Bank and Bank of China lowered their prime lending rates by 25 basis points, leading the first decline in rates in Hong Kong since November 2019. 

HSBC lowered its prime lending rate to 5.625% and lowered its savings rate for deposits that exceed HK $5,000 by 25 basis points to 0.625%. 

Bank of China's Hong Kong operations also lowered its prime lending and savings rate by a similar amount. 

BYD rose 0.5% to HK $244.0, Li Auto increased 4.3% to HK $82.30, and Xpeng edged up 0.4% to HK $35.65.