Hong Kong stock market ends six-day rise after the Chinese rate cut

Hong Kong's stock market twisted the six-day increase and closed lower as China’s central bank slashed the short-term rate after the US interest rate eased the yuan’s pressure.

The Hang Seng Index edged down by 0.06% to 18,247.11 at the close, snapping the six-day streak to last Friday, and the Hang Seng Tech Index decreased by 0.15% due to the drop in mainland electric vehicle stocks.

XIAOMI-W Holdings jumped by 3.37% to HK$20.55 after announcing the official launch of the latest Redmi Note 14 series on Sept. 26. Chinese Aoyuan Group surged by 126.89% as the UAE-based investment firm, Multi Gold Group, became its main shareholder.

The Chinese Biotech company Wuxi AppTec dropped by 3.65% at the close, and WuXi Biologics, its subsidiary, slipped by 5.08%. CHINA RES Power Group rallied 3.33% to its five-day high of HK$19.84 after the company published its financial report. LENOVO Group surged 2.56% to HK$9.63, and GEELY AUTO Group added 2.11% to HK$10.18 on its first trading day after launching its new car last Friday night.

“The cut of US interest rate last week made Hong Kong’s stock gain rapidly,” said Herald van der Linde, the head of equity strategy, Asia Pacific at HSBC.“But this week, as initial excitement and confidence at first hearing the interest rate cut have passed, people are considering whether the market could meet their expectations.”

Financial Secretary Paul Chan Mo-po reminded investors the pace of cuts in the prime rate used by commercial banks ‘may be slower’ than those in the US on Sept. 19.

The People’s Bank of China cut the 14-day reverse repurchase rate to 1.85% from 1.95% on Monday to maintain the liquidity of the banking system, according to the statement on its website.

The weak outlook of the US economy leads to the interest rate cut, which may add uncertainties to the Hong Kong stock market, said Linde. 

However, he added that the uncertainty might bring an issue next year since there’s no clear evidence that the US economy is pacing down.