HONG KONG (Nikkei Markets) -- Hong Kong stocks slid lower in the morning session on Thursday after projections by officials at the U.S. Federal Reserve signaled a smaller chance for further interest-rate cuts.
The Hang Seng Index fell 1.2% to 26,421.91 by noon, with 46 of its 50 constituents trading lower. Financial companies, which tend to report smaller profits in a falling interest-rate environment, were among the biggest contributors to the morning's losses, while property developers were relatively resilient. Shares of pan-Asia insurer AIA Group and London-headquartered lender HSBC Holdings dropped 3% and 1.2%, respectively.
A Hang Seng gauge of large developers slid 0.8%, with industry leader Sun Hung Kai Properties slipping 0.3%.
The Fed on Wednesday cut its policy interest rate by 0.25 point to a range of 1.75% and 2%, matching expectations. Projections by its members, however, clouded the market's outlook for further loosening. A so-called dot-plot by the Fed's officials showed seven officials anticipate one more rate reduction by December, five expect no further cuts and five expect a rate increase.
The Fed's dot-plot projections show a "rather big discrepancy" with market expectations, said Ricky Huang, an analyst at Luk Fook Financial Services in Hong Kong. "You can see the Fed is divided, so investors are a bit disappointed."
Still, impact on the market was likely to be a short-term affair as global markets were still heading higher, he added.
Meanwhile, Shane Oliver, head of investment strategy and chief economist at AMP Capital, said the Fed's dot-plot is likely more dovish than it looks.
"It is likely that the seven who see a cut include the Fed leadership of Powell, Clarida and Williams and are mostly voting members, whereas there is likely a lot of non-voters in the five who see no change and the five who see a hike," he said, referring to Fed Chairman Jerome Powell, Vice Chairman Richard Clarida and Federal Reserve Bank of New York President John Williams.
The Hong Kong Monetary Authority on Thursday said it was lowering its own benchmark rate by 0.25 point, following the Fed's decision. Policy rates in Hong Kong move in tandem with those of the Fed because the city's currency is pegged within a range of 7.75-7.85 against U.S. dollar.
The Hong Kong dollar strengthened less than 0.1% to 7.8261 on Thursday, while the yuan traded onshore in China weakened 0.2% to 7.1021 against the U.S. dollar. The Shanghai Composite Index was little changed by midday.
AAC Technologies Holdings, a supplier to U.S. smartphone giant Apple, gained 5.4% in Hong Kong to extend its 10.2% surge the previous day, on lingering expectations for upbeat iPhone sales following the launch of new models by the U.S. company earlier this month. Among other iPhone suppliers, Cowell e Holdings gained 0.8%, while Tongda Group Holdings advanced 1.5%.
Tongda, which also makes components for notebook computers and other electronics products, said on Wednesday that it is considering a spinoff and separate listing of its unit Tongda (Xiamen) Smart Technology on the ChiNext board of small companies in Shenzhen.
Shares of Esprit Holdings gained 2.8% in choppy trading after the apparel retailer late on Wednesday reported a narrower loss for the year ended June 30 than in the previous fiscal year.
China Shenhua Energy declined 0.6% following a 5.2% fall in August coal sales volume.
Cosmetics retailer Sa Sa International Holdings slipped 0.6% after reporting a 15% year-on-year drop in sales turnover for the April to August period.
-- Benny Kung