Thursday 01 Jun 2023
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HONG KONG (March 22): Chinese and Hong Kong stocks rallied for a second day on Wednesday (March 22), after US banking stocks rebounded overnight on hopes that a global banking crisis has been averted for now, while investors waited for the US Federal Reserve's (Fed) monetary policy decision later in the day.

China's blue-chip CSI 300 Index was up 0.43%, while the Shanghai Composite Index climbed 0.31%.

The Hang Seng Index jumped 1.73%, while the Hang Seng China Enterprises Index gained 1.38%.

Chinese President Xi Jinping left Russia on Wednesday. During his two-day visit, Xi barely mentioned the Ukraine conflict, and said on Tuesday in final remarks that China had an "impartial position".

US banks were higher overnight after Treasury Secretary Janet Yellen said that she is prepared to intervene to protect depositors in smaller US banks suffering deposit runs.

Ahead of the Fed interest rate decision, risk-on sentiment was charged up. Michael Dyer, an investment director of M&G Investment said this time around, the Fed is clearly closer to the end of its hiking cycle than the beginning.

"We witnessed a material shift in both the expected terminal value of Fed policy, and the potential for cuts in the latter part of the year," he said, but stressing that "it would be naive to assume that inflation is no longer a serious headache for the Fed".

High uncertainty over the interest rate outlook remains — Hong Kong's overnight interbank offer dropped the most in over three years on Wednesday, down 174.5 basis point (bps) to 2.39786%, and retracing from a near four-month high of 4.14286% seen on Tuesday. The one-month interbank rate also fell 13 bps to 3.36887%.

"Easing concerns over the AT1 bond sell-off and the pricing-in of the Fed's potential dovish tone have helped market sentiment," said Dickie Wong, a director of research at Kingston Securities.

Hong Kong bank stocks rebounded. Standard Chartered jumped 3.7%, and HSBC rose 3.1%.

Hong Kong-listed tech giants climbed 1.1%. Alibaba Group gained 3%.

In China A-shares, leading the gains were 5G communication, up 3.6%, and the CS AI Index, which advanced 2.9%.

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