China, Hong Kong shares gain on tech strength, as investors await Fed

Shanghai and Hong Kong markets saw a rise on Wednesday, driven by tech shares, but investors were cautious about making large bets prior to the Federal Reserve's policy announcement. The Shanghai composite index rose 0.6%, while the blue-chip CSI300 index increased 0.7%. Tech shares, particularly the ChiNext Composite index, gained 2.4% and Shanghai's STAR50 index increased 4.5%.

The People's Daily, China's top newspaper, suggested that AI is not solely the domain of major powers and that the US should collaborate with China to manage risks and foster an equitable development environment.

In Hong Kong, the Hang Seng index edged up by 0.1%, with tech shares in the city rising 0.9%. Fed Chair Kevin Warsh has expressed reluctance in providing any guidance on the future trajectory of US interest rates. However, elevated inflation, oil prices above $100 per barrel, and his emphasis on price stability have made it clear that the Fed will likely raise rates on Wednesday and continue to hike rates by the end of March according to a Reuters poll.

The primary question now is whether the Fed will view today's rate hike as a modest adjustment to counter inflation or as the start of a larger tightening cycle. If the Fed is perceived as being insufficiently hawkish on inflation, it could lead to lower short-term yields but potentially higher long-term yields, steepening the yield curve.

US Treasury Secretary Scott Bessent is set to meet with Chinese Vice Premier He Lifeng this weekend, in advance of the upcoming meeting between President Donald Trump and Chinese President Xi Jinping next week.