China, HK benchmarks slip as gold stocks fall on US rate hike

Hong Kong and China stock markets fell on Thursday, as gold, non-ferrous metals, and property sectors declined following the US Federal Reserve's first interest rate hike in three years. Both the CSI300 Index in China and the Shanghai Composite Index experienced a 0.4% decline by midday. The Hong Kong benchmark Hang Seng Index plummeted 0.8%.

The Federal Reserve increased interest rates on Wednesday, signaling more rate hikes to come, which sent a more hawkish signal than anticipated. In China, gold stocks plummeted 5%, while shares in non-ferrous metals dropped 3%. Hong Kong's property firms witnessed a 1.9% decline. The city raised its base interest rate by 25 basis points to 4.25%, matching the Fed's hike.

However, biotech and semiconductor shares outperformed in both markets. Analysts anticipate that China's A-shares will outperform Hong Kong shares over the next year due to their stronger exposure to AI hardware and related supply chains. Hong Kong stocks may struggle to rebound significantly as they are more vulnerable to weak domestic consumption, given their consumer-oriented nature.

CICC's Kevin Liu, an offshore China and overseas strategist, indicated that China A-shares offer a more compelling outlook for the rest of the year, highlighting the need for fiscal stimulus or a "DeepSeek moment" to trigger a substantial recovery in Hong Kong stocks. The Shenzhen Index declined 0.24%, while the ChiNext Composite Index and Shanghai's tech-focused STAR50 Index fell 0.12% and 0.39%, respectively.