The U.S. Federal Reserve announced its interest rate meeting, and the results were within expectations and somewhat unexpected. The expectation was to raise interest rates by 0.75%, but beyond expectation was Powell’s hawkish attitude towards rising interest rates. Powell has often put hawks in recent days, but adding more feet following raising interest rates by 0.75% may not have been estimated in advance. Powell’s hawking has the effect of exporting, creating psychological expectations, accelerating the cooling of the economy, and the rate hike cycle peaking earlier.
High growth can be achieved with high interest rates
Before the news was announced, U.S. stocks were still up. After the announcement, they turned lower and closed lower. The Dow Jones Index fell 522 points overnight to close at 30,183 points, or 1.7%; the Nasdaq fell 1.8% to close at 11,220 points; the S&P 500 index fell 1.7%, It closed at 3789 points, down 21.4% from the high level. According to the definition of economists, it officially fell into a technical bear market once more, and the Nasdaq was 1.7 percentage points away from the bear market. The U.S. economy is still in a hard net. With no significant weakening in demand, inflation remains high. It seems inevitable that the Federal Reserve will trade recession for inflation, and the stock market has a good chance to accompany the decline.
The US interest rate will continue to rise, and the Hong Kong interest rate will inevitably rise under the linked exchange rate. Faced with the US preparing for a recession, what is the situation in Hong Kong? Some business circles said that from the perspective of interest rate policy, Hong Kong is pegged to the US dollar, which is like giving up the policy of actively manipulating interest rates. The US uses interest rate hikes to cause recession to weaken demand, and only then can inflation be reduced. This policy arrangement and goal is not necessarily inevitable in Hong Kong. First, whether high interest rates will inevitably lead to recession, the two are related but not inevitable, because as long as the growth momentum is strong enough to make up for the rise in interest rates, the economy can maintain growth under interest rate hikes; second, the United States needs to weaken demand to reduce inflation, and inflation in Hong Kong is far from Below the US, there is no need for this, so there is no policy need for a recession.
Business circles also pointed out that the current unemployment rate in Hong Kong is only 4.1%, and it is still declining. The economic enthusiasm is actually not low. A little increase in interest rates may not be a bad thing. The key is whether interest rates will continue to soar and the society will respond accordingly.
Leaving aside the theory, in the face of interest rate hikes, if Hong Kong can maintain strong demand growth, it should be able to avoid recession under external headwinds. In reality, if Hong Kong can vigorously open up the flow of people and logistics, everyone has business to do, even if the interest rate rises a little, it should be able to support. The experience of relaxation in Europe and the United States shows that the retaliatory consumption and demand recovery brought regarding in the early stage of normalization can bring regarding quite strong demand, which is enough to offset the impact of rising interest rates. Therefore, Hong Kong has the conditions to go upstream. The key is How does the government guide this force to create business conditions that are resistant to adversity?
The Hang Seng Index once broke through the 18,000 mark
Going up once morest the current is not a matter of doing what you want, and you have to make arrangements if you want to forgive, but the U.S. interest rate hike has already reached its peak. Under the pressure of the low closing of U.S. stocks, the Hang Seng Index once fell below the 18,000-point level, reaching a low of 17,965 points, down 479 points, a record high. The 11-year low, and then 18,000 points were lost and recovered, to close at 18,147 points, down 296 points; the HSCEI fell 71 points to close at 6,195 points; the KSE Index closed at 3,673 points, down 63 points, with a turnover of 85.1 billion yuan.
HSBC announced to raise the prime rate (P) by 0.125% to 5.125%, local real estate stocks were under pressure. Xindi (016) fell 1% to close at 93.65 yuan; Henderson Land (012) fell 1.8% to close at 24.2 yuan; New World (017) added 3%. Although banks have increased interest rates, the sector is still down. HSBC (005) fell 3.6% to close at 45.7 yuan; Standard Chartered Group (2888) fell 1.2% to close at 53.1 yuan; Hang Seng Bank (011) fell 1.6% to close at 121.9 yuan ; Bank of East Asia (023) fell 2.2% to close at 9.7 yuan; Dah Sing Bank (2356) fell 1.4% to close at 5.73 yuan.
In addition, Bank of America Securities released a report that the economic slowdown may tighten customer budgets, especially in small and medium-sized enterprises, which may have the opportunity to drag down Lenovo Group (992) business growth momentum, the bank lowered Lenovo’s fiscal year 2023-2025 earnings forecast 3% to 11%. Lenovo’s stock price fell 3% to close at 5.9 yuan; GOGOX (2246) was reduced by Alibaba’s Cainiao, and GOGOX fell another 9% to close at 5.11 yuan. Xinyi Glass (868) added 5% to close at 12.2 yuan, being the worst performing blue-chip stock.
Jin Riku
