Hong Kong stocks declined at the noon trading break on Thursday, as China decided to keep its lending rates unchanged. Investors are now looking forward to further policy support from Beijing, especially with the city’s handover anniversary approaching next month.
The Hang Seng Index fell 0.5 percent to 18,341.53 by midday, following its largest daily gain in three months on Wednesday, where it surged 2.9 percent. The Hang Seng Tech Index tumbled 1.4 percent, while the Shanghai Composite Index slipped 0.3 percent.
“Today may seem uneventful after yesterday’s significant market advance, but overall, I remain cautiously optimistic due to policy expectations,” said Kenny Wen, head of investment strategy at KGI Asia. He noted that investors are awaiting potential policy support for Hong Kong’s economy and stock market around the July 1 anniversary of the city’s handover to China and the upcoming third plenum of the Central Committee of China’s Communist Party next month.
On Thursday, the People’s Bank of China left the benchmark lending rates unchanged, a widely anticipated move following the central bank’s decision to hold its one-year medium-term lending facility earlier this week. The one-year loan prime rate (LPR), used for most new and outstanding loans in China, was maintained at 3.45 percent, while the five-year LPR, a benchmark for mortgages, stayed at 3.95 percent.
“The renminbi has been under considerable pressure recently, and rate cuts would exacerbate this,” said Leah Fahy, assistant economist at Capital Economics. “Policymakers are keen to avoid further weakening of the currency, given the government’s emphasis on maintaining currency strength.”
Market Movers
Semiconductor Manufacturing International Corporation (SMIC) saw a notable rise, advancing 3.9 percent to HK$19.6 amid speculation about its capability to produce 5nm chips using older deep ultraviolet lithography machines.
Chinese state-owned enterprise (SOE) stocks also traded higher. CNOOC gained 2.9 percent to HK$23.35, PetroChina advanced 2.1 percent to HK$7.78, and China Petroleum and Chemical surged 1.9 percent to HK$4.94, following Wednesday’s inflows from state-run funds, including China Reform Holding.
China Reform’s unit, Guoxin Investment, subscribed to the first batch of CSI Guoxin Hong Kong Stock Connect SOE Dividend ETFs, issued by GF Fund Management, China Southern Asset Management, and Invesco Great Wall. According to a Wednesday announcement by China Reform, this move demonstrates the role of state-owned capital in “enhancing the pricing power of Hong Kong-listed SOEs.”
Retail stocks, however, experienced declines. Haidilao, a Chinese hotpot restaurant operator, fell 6.1 percent to HK$15.32, apparel maker Shenzhou International dipped 4.3 percent to HK$79.85, and Budweiser Brewing declined 3.7 percent to HK$8.78.
Broader Asian Markets
Other key Asian markets were broadly lower. Japan’s Nikkei 225 declined 0.3 percent, and Australia’s S&P/ASX 200 dropped 0.2 percent. Conversely, South Korea’s Kospi rose 0.3 percent, showing some resilience amid the regional downturn.
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