HONG KONG (Nikkei Markets) -- Hong Kong shares sank to a two-week low on Thursday after the U.S. Federal Reserve raised interest rates for the second time this year and hinted at two more increases by the end of December.
The Fed on Wednesday raised its key interest rate by 25 basis points and indicated it may raise rates one more time this year than it had forecast in March. U.S. equity benchmarks ended lower overnight after the policy review.
The Hong Kong Monetary Authority followed up on Thursday by raising its benchmark rate by 25 basis points. Hong Kong's monetary policy is tied to the Fed as the city's currency is pegged to the U.S. dollar.
The Hang Seng Index shed 0.9% at 30,440.17. Developers Sino Land and Hang Lung Properties lost 2.2% and 1.7%, respectively. Heavyweight Tencent Holdings shed 0.8%, while insurance major AIA Group dropped 1.4%.
"The Fed's statement overnight was not too hawkish, and roughly in line with market expectations, but what worries investors is they do not have clear consensus on the 2019 rate hike path," said Andy Wong, chief investment strategist at wealth management company Harris Fraser (International).
Wong said the Hong Kong stock market will likely see low average daily turnover of 90 billion Hong Kong dollars ($11.5 billion) for the duration of the soccer World Cup, which starts in Russia on Thursday and concludes on July 15. He expects the Hang Seng to remain range-bound, but to be "climbing slowly in general" in the medium term.
About HK$97 billion of shares changed hands on the stock exchange on Thursday.
In the mainland, the Shanghai Composite edged 0.2% lower on Thursday while its Shenzhen counterpart lost 0.6%. Data released on Thursday showed China's retail sales rose 8.5% in May, while industrial production for the month expanded 6.8%. Both numbers missed estimates compiled in a Reuters poll.
Chinese telecommunications equipment maker ZTE fell 1.1% in Hong Kong, giving up early gains and adding to its 41.6% plunge on Wednesday. Its Shenzhen-listed shares fell by the maximum permissible 10% for a second day.
The stock resumed trading in both cities Wednesday following a near two-month halt after the company agreed to pay $1.4 billion in civil penalties and make changes to its board and management to lift a U.S. government ban on American companies supplying it with components.
ZTE late on Wednesday said it plans to hold its annual shareholders' meeting in Shenzhen on June 29 and nominated five non-independent directors and three independent directors for election.
Ping An Insurance Group rose 0.6% after saying accumulated gross premium income for its life insurance business in the January to May period was up 21.3% on year. China Life Insurance, which reported a 2.9% increase in accumulated premium income for the first five months of the year, shed 0.5%.
Mainland developer China Resources Land declined 3.7%, trimming its year-to-date gains to about 26%. The company on Wednesday said it acquired five land parcels in May for a land premium of 5.72 billion yuan ($895 million).
Peace Map Holding slid 10.8% after the data collection and processing company proposed to consolidate every five existing shares into one.
FDG Electric Vehicles slumped 13.3% after saying it expects to report that its net loss for the year ended March 31 tripled or quadrupled that of the previous fiscal year. In May, the company had said the net loss could rise 130% from the year before. Unit FDG Kinetic slid 11.1% after the battery maker also forecast a wider loss for the last fiscal year.
-- Amy Lam