- The Hang Seng Index rebounds from more than a three-month low on relief rally after regulators in the UK and Europe moved to shore up confidence
- Traders have stepped up bets on a 25-basis point hike in US interest rates at this week’s poilicy meeting
Hong Kong stocks rebounded in a “band-aid” rally as regulators stepped in to reassure investors following a US$122 billion global rout in banking stocks over the past week linked to Credit Suisse crisis and failures at US midsize lenders.
The Hang Seng Index climbed 0.6 per cent to 19,121.94 as of 10.40am local time. The Tech Index gained 0.8 per cent while the Shanghai Composite Index added 0.3 per cent. The city’s benchmark index slumped yesterday to the lowest level since December 7.
HSBC appreciated 2.6 per cent to HK$51.75 while its subsidiary Hang Seng Bank gained 0.9 per cent to HK$115 and AIA Group leapt 3 per cent to HK$77.90, recouping their steep losses on Monday. Alibaba Group added 0.6 per cent to HK$79.70 and WuXi Biologics jumped 3.9 per cent to HK$46.90.
“Investor optimism was given a Band-Aid,” analysts at Saxo Bank said in a note to clients. “That said, investors are also hoping financial stability concerns will spur Fed Chair Jerome Powell to dial back on a hike and his [hawkish] tone.”
The MSCI All-Country World Banks Index lost US$122 billion over the past seven days, according to Bloomberg data. amid the banking crisis in the US and Europe, following the collapse of Silicon Valley Bank and the implosion at Credit Suisse. Some US$150 billion of value was erased from the Hang Seng Index and the MSCI China Index over the same period.
Regulators in the UK and Europe sought to restore confidence in the market on Monday after the UBS takeover of Credit Suisse wiped out some US$17 billion of capital instruments held by investors. In the US, regulators are studying plans to guarantee all deposit if the banking crisis continues to worsen, Bloomberg reported.
In Hong Kong, the monetary authority and the Securities and Futures Commission said the Credit Suisse situation represented “low exposure” to the city’s financial-market stability given its relatively small presence.
Those measures to contain the crisis are, however, fuelling bets the Federal Reserve will proceed with its policy tightening this week. Current bets on a 25-basis point hike have increased to 73 per cent, according to Fed fund futures. The odds had earlier fallen to just over 50 per cent before the UBS takeover of Credit Suisse on Sunday.
Major Asian markets advanced on Tuesday, with benchmark indexes in South Korea and Australia gaining 0.6 per cent to 1.3 per cent. Japan’s market is closed for public holiday.
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