Hong Kong stocks near 6-week low as US inflation report fuels rate fears

Investors seen returning to caution amid jitters that the rally fuelled by China’s reopening has outstripped any improvement in fundamentals.

Hong Kong stocks slumped to a six-week low after a report showing hotter-than-expected US inflation stoked concerns that the Federal Reserve will further tighten monetary policy to contain rising prices.

The Hang Seng Index fell 1.3 per cent to 20,840.78 at the noon break, heading for the lowest close since January 4. The Hang Seng Tech Index dropped 0.5 per cent and the Shanghai Composite Index lost 0.3 per cent.

Alibaba Group retreated 1.1 per cent to HK$101.40, Tencent Holdings lost 0.3 per cent to HK$377.40 and Meituan fell 1 per cent to HK$146.20. Property developers also declined, with Longfor Group sinking 2.7 per cent to HK$24.90 and China Resources Land shedding 2 per cent to HK$36.05.

US inflation accelerated to 6.4 per cent from a year earlier in January, compared with the estimate of 6.2 per cent, according to an official report. Readings from Fed officials were mixed, with the hawkish camp saying that rate increases could continue for a longer period of time and the dovish saying that rates are close to the terminal level.

“The extended consistency of Fed rate hikes will wear on consumer, business and investment nerves alike,” said Clifford Bennett, chief economist at ACY Securities. “Further retrenchment of consumer and business investment is a certainty.”

Untamed inflation is a setback for traders who expected the Fed to roll back or even pause interest-rate increases this year as a global recession looms, further dimming the outlook for Hong Kong stocks that have been whipsawed by geopolitical risks and a tough regulatory environment.

The Hang Seng Index has fallen 8 per cent since a high on January 27, amid jitters that the rally spurred by China’s reopening has outstripped any improvement in fundamentals. Sluggish consumer spending and the downturn in the property market are among the key concerns of fund managers investing in Chinese stocks, according to Goldman Sachs.

Separately, China has kept its one-year loan prime rate unchanged at 3.65 per cent for a fifth consecutive month in January, while the five-year rate was also left unchanged at 4.30 per cent.

Chinese sportswear maker Anta Sports Products, a rival of Li Ning, tumbled 3.6 per cent to HK$106.70 after 84.5 million shares were transferred to the Hong Kong exchange’s clearing and settlement system, a move interpreted by some traders as preparation for a stake reduction.

Hua Hong Semiconductor jumped 3.9 per cent to HK$31.70 after China’s second-largest chip maker reported a 19 per cent year-on-year profit growth in the fourth quarter. The result beat the consensus estimate by 32 per cent, according to CCB International.

Shares of China Fortune Land Development slid by as much as 1.5 per cent in Shanghai after the Beijing-based developer confirmed its co-president Meng Jing has been detained for investigations into unspecified crimes. The stock recently traded 0.4 per cent higher at 2.69 yuan.

Other major Asian markets all fell. Japan’s Nikkei 225 slid 0.4 per cent, while South Korea’s Kospi retreated 1.3 per cent and Australia’s S&P/ASX 200 lost 1 per cent.