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Nikkei Markets

Hong Kong shares end week up amid bets on Fed rate cut

Tencent and BMW to set up center for driverless technology

HONG KONG (Nikkei Markets) -- Hong Kong shares ended higher on Friday to clinch a weekly advance after comments from U.S. Federal Reserve officials strengthened expectations for a increased rate cut later this month.

The Hang Seng Index rose 1.1% to 28,765.40 on Friday, ending the week 1% higher. Chinese internet services company Tencent Holdings advanced 1.5% on Friday. Tencent and German automaker BMW are partnering up to establish a computing center for the development of automated driving technology in mainland China, according to a statement from BMW.

Insurance heavyweights AIA Group and Ping An Insurance Group added 2.7% and 1.4%, respectively. Ping An-backed Chinese online wealth management platform Lufax is planning to exit its peer-to-peer lending business, Reuters reported, citing three sources with direct knowledge of the matter.

Expectations for a rate cut in the U.S. mounted this week after Fed Chairman Jerome Powell signaled the central bank was ready to lower interest rates at its July meeting.

New York Federal Reserve President John Williams during a speech on Thursday stressed the importance of acting "quickly to lower rates at the first sign of economic distress."

Fed Vice Chairman Richard Clarida told Fox Business Network that the central bank did not "need to wait until things get so bad to have a dramatic series of rate cuts." The comments helped boost expectations for a 50 basis point rate cut when the Fed meets to review policy on July 30 and 31.

The probability of a 50 basis point interest rate cut by the Fed this month is currently at about 44%, according to CME's FedWatch Tool, up from 19.9% a week ago. The tool indicates a 100% probability of a rate cut at the meeting.

Lower interest rates in the U.S. tend to spark inflows into higher yielding riskier assets, including regional equities. The U.S. dollar index, measured against a basket of major currencies, declined 0.4% overnight.

"Emerging and Asian markets are experiencing more inflows this morning as investors prepare for a very accommodative monetary environment," said Ricky Huang, an analyst at Luk Fook Financial Service. "Yet, I think it is a very short-term catalyst, because the dollar may stabilize around this level."

On the mainland, the Shanghai Composite Index rose 0.8%, while the yuan traded onshore was little changed at 6.8758 against the dollar.

Coolpad Group sank 46.5% in Hong Kong as the mobile phone maker's stock resumed trading after a near 28-month halt. The company on Thursday said it had fulfilled all resumption conditions, including publishing outstanding financial results and conducting investigations to address issues that auditors had raised earlier.

Hong Kong-based railway operator MTR fell 2.7% after saying it would make a provision of 2 billion Hong Kong dollars ($255.91 million) for the six months ended June 30 toward costs related to the construction of a new line.

FIH Mobile advanced 1.2% after saying it expected a consolidated loss for the six months ended June 30 to narrow to about or below $85 million, from $348.6 million a year ago.

China Railway Construction added 2.7% after the state-owned construction company reported a 28% jump in value for newly signed contracts for the second quarter.

Prosperity International Holdings jumped 5.5% as trading resumed after a two-week halt. The iron ore miner reported a loss of HK$1.83 billion for the year ended March 31, wider than the HK$961 million loss it reported the previous year.

Shanghai Fudan-Zhangjiang Bio-Pharmaceutical surged 8.9% after saying it expected net profit for the first half to rise more than 50% from a year ago.

-- Amy Lam

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