Hong Kong stocks approach 2-week high as US inflation report raises odds of rate cuts

Consumer price index delivers ‘a pleasant surprise’ and suggests ‘gentle easing of persistent inflationary pressures’, investor says

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A view of Exchange Square in Central, home to Hong Kong’s stock exchange operator, on January 9, 2025. Photo: Jelly Tse

Published: 10:21am, 16 Jan 2025Updated: 4:25pm, 16 Jan 2025

Hong Kong stocks rose to an almost two-week high as slower growth in US consumer prices bolstered the case for the Federal Reserve to cut interest rates, while investors wait for fourth-quarter economic data that may show a stronger recovery in China.

The Hang Seng Index climbed 1.2 per cent to 19,522.89 at the close, the highest level since January 6. The Hang Seng Tech Index rose by the same amount. In China, the CSI 300 Index added 0.1 per cent, and the Shanghai Composite Index gained 0.3 per cent.

Aluminium maker China Hongqiao Group rallied more than 5 per cent as the best performer on the Hang Seng gauge after conducting stock buy-backs. Wharf Real Estate Investment led Hong Kong’s property developers higher on optimism that the city will lower borrowing costs in tandem with the US, reducing the mortgage burden on homebuyers.

The US core consumer price index, which excludes food and energy costs, increased 0.2 per cent month-on-month in December, marking the first slowdown in six months. On a year-on-year basis, inflation accelerated by 3.2 per cent, still above the Fed’s target of 2 per cent. Some officials said the data delivered confidence that inflation would continue to cool. The S&P 500 advanced almost 2 per cent and the Nasdaq 100 rallied more than 2 per cent in overnight trading.

“A critical inflation report delivered a pleasant surprise, hinting at a slowing pace of core price hikes,” said Stephen Innes, managing director at SPI Asset Management in Bangkok. “This deceleration suggested a gentle easing in the persistent inflationary pressures that have dogged the market. With this information, Thursday should be a brighter day for trading across Asia.”

Investors will also be on the lookout for China’s key economic data, which will be released on Friday morning. Fourth-quarter economic growth probably accelerated to 5 per cent from 4.6 per cent in the preceding three-month period, according to the estimate of economists tracked by Bloomberg. If that materialises, it will help China meet its annual growth target of around 5 per cent for 2024.