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=ASIA MARKETS: Hong Kong Stocks Jump After US Rate Cut Signal

HONG KONG (Jul 11) -- Hong Kong stocks jumped alongside other Asian markets on Thursday, after U.S. Federal Reserve Chairman Jerome Powell signaled that the central bank is ready to cut borrowing costs.

The benchmark Hang Seng Index added 1.2% to 28,539.74 by the midday break. Forty-seven of the gauge’s 50 members were trading higher, with pan-Asia insurer AIA Group rising 1.9% and China Construction Bank advancing 1.6%. Chinese energy companies rallied, tracking gains for oil prices after U.S. benchmark crude futures jumped overnight to top $60 a barrel. PetroChina increased 3.1% and CNOOC gained 2.6%.

Fed Chairman Powell on Wednesday signaled, in a testimony before U.S. lawmakers, that the central bank is ready to lower interest rates at its meeting later this month, citing risks to the economy from trade-related uncertainties. The signal for an imminent move came days after U.S. payrolls data for June released last week proved to be better than expected, leading some participants who were anticipating an aggressive rate cut by the central bank to lower their expectations.

In Hong Kong, where policy rates move in tandem with U.S. rates because of the local currency’s peg to the American dollar, the interbank money market rate with a one-month tenor headed lower for a fifth straight day.

Andy Wong, chief investment strategist at LW Asset Management, attributed the day’s stock gains to Powell’s indication, and local interbank rates, which have “finally” begun to retreat.

Powell’s remarks implied the Fed is “very bearish on the economy over the next few months, and grimmer economic conditions do not bode well for corporate earnings,” Wong said. Still, the Hang Seng Index was likely to rise gradually in the third quarter, following stimulus measures by Beijing in recent weeks, he added.

The Shanghai Composite Index was up 0.3%, after rising as much as 1% in early trading. The yuan traded onshore strengthened 0.1% to 6.8641 against the U.S. dollar. The Nikkei Asia300 Index of regional companies outside Japan gained 1.1%.

China Overseas Grand Oceans Group was among the notable movers in Hong Kong on Thursday, surging 14%. The Chinese property developer expects its net profit for the six months ended Jun. 30 to increase 75% to 85% from a year ago.

A-Living Services advanced 7.8% after the Chinese property management company said it expects consolidated net profit for the six months ended Jun. 30 to jump more than 50% from a year ago.

Leyou Technologies climbed 3.4%, after the Chinese game developer announced an agreement with a division of U.S. internet services major to co-develop and publish a free-to-play, massively multiplayer online game based on the fantasy literary title “The Lord of the Rings.”

China Meidong Auto Holdings gained 3.9%. The Chinese automobile dealership operator said it expects net profit for the first half of this year to increase more than 35% from the same period last year.

Johnson Electric Holdings slumped 8.8% after it reported a drop in fiscal first-quarter sales and lowered its profit outlook for the six months ending Sep. 30.

- By Amy Lam; Amy.Lam@nikkeinewsrise.com; +852 3960 5150
- Edited by V. Phani Kumar
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