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US rate hike speculation dampens Hong Kong property shares

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Residential blocks are reflected on the glass panes of a business tower in Hong Kong.   © Reuters

HONG KONG -- Heightened expectations of an early rate increase by the U.S. Federal Reserve weighed on property shares in Hong Kong on Monday.

Cheung Kong Property Holdings, led by Hong Kong billionaire Li Ka-shing, briefly fell to a low of 56.3 Hong Kong dollars, down HK$2.15, or 3.7%, from Friday. Sun Hung Kai Properties and Henderson Land Development also fell.

Investors grew increasingly wary of the future course of Hong Kong's property market, given rising caution in the U.S. late last week following comments by a Fed official that signaled an early rate hike. Hong Kong's monetary policy is tied to that of the U.S., as the special administrative region pegs its currency to the U.S. dollar.

If the Fed decides to raise rates this month, banks in Hong Kong would have to raise rates slightly, including mortgage rates, said Eric Yuen Chi-fung, head of research at Guoco Capital. But, he added, the impact from the rate hike would be more of a psychological one on investors and on the prices of property stocks, rather than an impact on the real estate market itself.

Hong Kong's property market has been showing signs of recovery, with the latest Centa-City Leading Index for existing homes for Aug. 15-21, compiled by Centaline Property, rising to the highest level in 39 weeks.

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