Hong Kong stocks decline as rising bond yields and stalemate in Iran war dent sentiment

Hong Kong stocks experienced a decline on Wednesday, as a combination of rising US Treasury yields and the ongoing deadlock in the Iran conflict dampened investor sentiment. The Hang Seng Index dropped 0.5% to 25,323.70, while the Hang Seng Tech Index fell 1.4%. On the mainland, the CSI 300 Index dropped 1.6% and the Shanghai Composite Index retreated 1%.

The increase in capital costs, particularly due to the elevated valuations of stocks, has put pressure on the market, especially within the technology sector. This was exacerbated by sell-offs in US Treasuries, where yields had surged to multi-year highs. The yield on 10-year Treasuries reached its highest since early 2025, while that on 30-year Treasuries soared to levels not observed since 2007, as the US government increased borrowing to finance fiscal deficits and hyperscalers expanded their bond sales to fund artificial intelligence initiatives.

Geopolitically, Brent oil prices stood at US$91.67 a barrel, with the US and Iran deadlocked over control of the Strait of Hormuz. This stalemate has left investors uncertain about the likelihood of the US Federal Reserve adopting a hawkish stance in monetary policy.