Hong Kong stocks boosted by US rate cut hopes, EV makers surge as EU divided on tariffs

Hong Kong stocks jumped as risk appetite received a boost after soft US data and dovish comments on the inflation outlook in the Federal Reserve's minutes. BYD and Li Auto rallied as EU countries hesitated on imposing additional tariffs on Chinese-made electric vehicles.

The Hang Seng Index gained 0.1 per cent to 17,988.25 at local noon trading break after scaling 18,000 earlier in the morning session. The Tech Index added 0.5 per cent on the back of the 2.5 per cent gain posted on Wednesday, while the Shanghai Composite Index declined 0.4 per cent.

Search engine operator Baidu gained 1.1 per cent to HK$87.15 and e-commerce site operator Alibaba jumped 1.5 per cent to HK$73.25, leading advances among tech heavy weights. Online travel agency Trip.com climbed 3 per cent to HK$390.40 while food delivery platform Meituan advanced 2.3 per cent to HK$119.80.

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Electric vehicle maker BYD appreciated 0.9 per cent to HK$37.70 and rival Li Auto surged 3.9 per cent to HK$80.80, after a Reuters report that the German car industry had urged EU to drop tariffs on China EVs.

Sentiment was buoyed by US data released overnight that supported the case for a US interest rate cut. Meanwhile Federal Reserve minutes of June's meeting showed that officials felt "price pressures were diminishing". Chances of a 25 basis point cut in interest rates at the Fed's September meeting rose to 67 per cent from 51 per cent a month ago, according to CME Fedwatch tool.

"The liquidity situation of Hong Kong stocks is expected to improve further," Melody Lai, Chief Strategist at Shanghai Pudong Development Bank in Hong Kong, said in a note. Global funds are set to flow into emerging markets ahead of the Fed's easing cycle, while stepped-up purchases by onshore investors also boded well for the market, she added.

Offsetting the gains, a report showed Hong Kong's private sector activity contracted at a faster pace in June amid the mainland's shaky economic recovery. The S&P Global Purchasing Managers' Index fell to 48.2 in June from 49.2 in May, remaining below the 50 mark that separates expansion from contraction, for a second month.

Elsewhere, Hong Kong's Mandatory Provident Fund (MPF) reported its best first-half performance in five years as its assets grew to a record high of HK$1.227 trillion (US$157.3 billion) thanks to a strong stock market. The MPF's 379 investment funds earned a combined HK$59.6 billion in the first half, equivalent to HK$12,500 for each member.

Other key Asian markets gained on improved risk appetite. Japan's Nikkei 225 added 1.3 per cent, South Korea's Kospi edged up 0.5 per cent and Australia's S&P/ASX 200 gained 0.3 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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