March 16, 2017 2:40 pm JST

Hong Kong stocks set for three-week high after Fed rate signal

HONG KONG (NewsRise) -- Hong Kong shares headed for a three-week high after the U.S. Federal Reserve's unchanged forecast for rate hikes through 2018 boosted global equities.

The Fed on Wednesday delivered a widely expected 25 basis-point rate increase, citing an improving economy and a strengthening labor market, but didn't signal an increase in the pace of monetary tightening as was feared in the lead up to the meeting. The central bank's interest-rate projections, the so-called "dot plot," indicated two more rate hikes in 2017 and three in 2018, unchanged from its December forecast. The dollar index fell nearly 1% overnight and U.S. 10-year Treasury yields slid almost ten basis points.

"Investors were concerned that the Fed would adopt a hawkish stance and that was definitely not the case here. The fall in U.S. bond yields and the dollar are all providing a boost to Hong Kong and other markets," said Ben Kwong, executive director at KGI Asia.

The Hang Seng Index advanced 1.3% to 24,104.06 by midday, racing past the psychologically important 24,000 level, toward its highest since Feb. 24. China Unicom Hong Kong surged 4.3% despite reporting a 94% plunge in 2016 net profit late Wednesday. The mobile operator separately said it added 5.6 million 4G subscribers in February. PetroChina and China Petroleum & Chemical (Sinopec) added at least 2.7% after U.S. crude prices rose for the first time in eight sessions Wednesday.

The Hong Kong Monetary Authority earlier Thursday adjusted upwards its base rate by 25 basis points, matching the Fed's move. Interest rates in the city move in line with the U.S. on account of the local currency's peg to the dollar. China's central bank hiked rates by 10 basis points on its medium-term lending facility and reserve repo transactions amid rising inflation and asset prices.

Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) rose 1.8% each, leading mainland banks higher after PBoC's increase in short term rates.

"This is very much in response to what the Fed did," Kwong said. "PBoC will continue to use open market operations to regulate liquidity, and try and keep asset prices in check."

The Shanghai Composite and the Shenzhen benchmark rose 0.7% each. The onshore traded yuan advanced 0.3% to 6.8935 against the dollar, poised for its best session in almost two months.

Also helping risk appetite was news related to Dutch elections, where exit polls indicated that Prime Minster Mark Rutte is set to defeat his far-right rival. The Nikkei Asia300 index added 1.2% to 1,154.29.

Cathay Pacific Airways fell 1.9% to HK$11.22, extending Wednesday's 1.4% slide, after swinging to a loss in 2016.

Shares of Swire Pacific, a parent of Cathay Pacific, rose 0.2%. During the noon break, the conglomerate reported a more than 28% decline in 2016 net profit.

Samsonite International jumped 4.7% after the luggage maker reported a nearly 30% surge in 2016 net profit.

Chow Tai Fook Enterprises, a part of the conglomerate controlled by the Cheng Yu Tung family, plans to buy Alinta Energy, the Australian utility said in a statement. The deal is valued at about 4 billion Australian dollars ($3 billion), Reuters reported, citing sources. Chow Tai Fook Jewellery Group, also controlled by the Cheng family, slid 1.6% in Hong Kong. NWS Holdings, a group company with interests in the power sector, rose 2.7%.

--V. Phani Kumar and Nimesh Vora

Asia300

China Unicom (Hong Kong) Ltd.

Hong Kong

Market(Ticker): HKG(762)
Sector:
Industry:
Communications
Major Telecommunications
Market cap(USD): 35,921.31M
Shares: 23,947.08M
Asia300

PetroChina Co., Ltd.

China

Market(Ticker): HKG(857)
Sector:
Industry:
Energy Minerals
Integrated Oil
Market cap(USD): 196,591.12M
Shares: 183,020.97M
Asia300

China Petroleum & Chemical Corp.

China

Market(Ticker): HKG(386)
Sector:
Industry:
Energy Minerals
Integrated Oil
Market cap(USD): 104,289.04M
Shares: 121,071.20M
Asia300

Bank of China Ltd.

China

Market(Ticker): HKG(3988)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 154,083.86M
Shares: 294,387.78M
Asia300

Industrial & Commercial Bank of China Ltd.

China

Market(Ticker): HKG(1398)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 260,737.03M
Shares: 356,406.25M
Asia300

Cathay Pacific Airways Ltd.

Hong Kong

Market(Ticker): HKG(293)
Sector:
Industry:
Transportation
Airlines
Market cap(USD): 6,072.35M
Shares: 3,933.84M
Asia300

Swire Pacific Ltd.

Hong Kong

Market(Ticker): HKG(19)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 14,043.62M
Shares: 3,897.65M
Asia300

Chow Tai Fook Jewellery Group Ltd.

Hong Kong

Market(Ticker): HKG(1929)
Sector:
Industry:
Consumer Durables
Other Consumer Specialties
Market cap(USD): 10,884.82M
Shares: 10,000M

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