China and Hog Kong Stocks Trend Lower and Yuan Drops After Fed's Hawkish Outlook

Li Chen
19 Dec, 2024
Hong Kong

Stock market indexes in China and Hong Kong headed lower after rate decisions from the U.S. Federal Reserve and the Bank of Japan. 

The Hang Seng index recovered to a decline of 0.3% after falling as low as 1%, and the CSI 300 rebounded to a gain of 0.3% from the decline of 0.5%. 

Market sentiment soured after the U.S. Federal Reserve signaled fewer rate cuts in 2025 amid resurgent inflation and policy uncertainty. 

The Federal Reserve lowered the fed funds rate by 25 basis points, as widely anticipated, to a new range of 4.25% and 4.50% and raised the prospects of a rate pause at the next meeting in January. 

Benchmark indexes in New York quickly came under the pressure after the rate decision, and they dropped around 3.5% in overnight trading in New York. 

The Hong Kong Monetary Authority lowered its reference rate by 25 basis points to 4.75%, matching the U.S. Fed move and preserving the Hong Kong dollar's parity with the U.S. dollar. 

In other economic news, the Bank of Japan held its key rate around 0.25%, as widely anticipated, citing moderate improvement in economic conditions. 

The policy committee estimated annual consumer price inflation to range between 2.0% and 2.5% in 2025, driven in large part by service inflation. 

 

China Stock Movers 

The Hang Seng index fell 0.3% to 19,801.09, and the mainland-focused CSI 300 index added 0.3% to 3,952.92. 

The offshore yuan rate dropped to 7.32 against the U.S. dollar, the lowest since November 2023, after the Fed's rate decisions and more hawkish outlook than previously estimated.

Property stocks fell after the HKMA lowered rates tracking the U.S. Fed's move, but investors worried that slower and fewer rate cuts in 2025 could dent demand for new homes. 

Henderson Land Development Co. Ltd. decreased 3.5% to HK $23.25, Sun Hung Kai Properties Ltd. fell 2.4% to HK $72.20, and Hang Lung Properties dropped 2% to $6.18. 

Alibaba Group Holding dropped 1.5% to HK $82.80, Tencent Holdings jumped 2.9% to HK $417.60, and Meituan declined 1.5% to $157.80.