HONG KONG (Nikkei Markets) -- Hong Kong shares fell in the morning session on Thursday after the U.S. Federal Reserve raised interest rates for the second time this year and signaled the possibility of two more increases by the end of December.
The Fed on Wednesday raised its key interest rate by 25 basis points and signaled 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 had fallen 0.6% to 30,533.64 by noon. Developers Sino Land and Hang Lung Properties shed 1.5% each. Heavyweight Tencent Holdings shed 0.8% and was the biggest drag on the gauge by points. Ping An Insurance Group rose 1.3% after saying accumulated gross premium income for its life insurance business in the January-to-May period was up 21.3% on year.
"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).
Turnover on the Hong Kong stock exchange's main board reached HK$47.29 billion ($6.03 billion) by noon. Wong said the Hong Kong stock market will likely see low average daily turnover of HK$90 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.
In the mainland, the Shanghai Composite edged 0.3% lower on Thursday morning while its Shenzhen counterpart lost 0.4%.
Chinese telecommunications equipment maker ZTE rose 1.1% in Hong Kong after a 41.6% drop on Wednesday while its Shenzhen-listed shares fell by the maximum permissible 10% for a second day in China. 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.
Peace Map Holding slid 7.7% after the data collection and processing company proposed to consolidate every five existing shares into one.
Gemini Investments Holdings climbed 0.8% after saying it expects to swing to a consolidated profit in the six months ending June 30.
FDG Electric Vehicles slumped 14% 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