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Hong Kong Stocks Sink to Near 11-Year Low; Shunfeng Retreats 5%

MT Newswires ·  {{timeTz}}

05:15 AM EDT, 09/22/2022 (MT Newswires) -- Hong Kong stocks tumbled to their lowest in almost 11 years on Thursday, as investors dumped shares on fears that more interest-rate hikes by major central banks around the world will push the global economy into a recession.

The Hang Seng Index slumped 1.6%, or 296.67 points, to finish the session at 18,147.95, a closing level not seen since December 2011. The Hang Seng China Enterprises Index retreated 1.1%, or 71.26 points, to 6,195.90.

At the conclusion of its September policy meeting, the US central bank announced another 75 basis-point interest rate increase to tamp down soaring inflation.

Three 75-basis-point rate hikes in a row is unprecedented. The Fed raised its target interest-rate range to between 3% and 3.25%, the highest it has been since the global financial crisis in 2008 and warned of more pain ahead.

"No one knows whether this process will lead to a recession or if so, how significant that recession would be," Fed Chair Jerome Powell told reporters in a press briefing. "The chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer. Nonetheless, we're committed to getting inflation back down to 2%."

Hong Kong 's de-facto central bank mirrored the tightening and raised its base lending rate by 75 basis points to 3.5% with immediate effect.

As Hong Kong's currency is pegged to a narrow trading band between HK$7.75 and HK$7.85 per US dollar, the linked exchange system means the city raises or cuts borrowing costs in lockstep with rate changes by the Fed.

Higher interest rates in the US will stoke capital outflow from the city, weaken the local dollar and affect exports, Hong Kong Finance Secretary Paul Chan said.

In corporate news, Shunfeng International Clean Energy or SFCE (HKG:1165) fell almost 5% after calling off its planned sale of four solar power plants in China due to failure to meet certain conditions in the disposal agreements.

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