China stocks rebound as Fed rate relief lifts easing hopes
Updates to market close
By Summer Zhen and Samuel Shen
HONG KONG, Sept 19 (Reuters) -China shares rebounded from modest early losses on Thursday, led by gains in real estate developers and consumer goods, as the start of long-awaited U.S. rate cuts raised hopes that Beijing will have more latitude to stimulate the ailing Chinese economy.
China's blue-chip CSI300 Index .CSI300 and Shanghai Composite Index .SSEC rose 0.8% and 0.7%, respectively.
Hong Kong, which is more sensitive to external monetary conditions, saw its Hang Seng .HSI gauge climb 2% to hit a two-month high, while the Hang Seng Tech Index .HSTECH jumped more than 3%.
The U.S. central bank on Wednesday kicked off an anticipated series of interest rate cuts with a larger than usual half-percentage-point reduction.
Investor sentiment perked up as the U.S. rate cut provides Beijing with more room to ease monetary conditions and other policies, with less risk of heaping pressure on the yuan.
China is widely expected to trim its main policy and benchmark lending rates on Friday, a Reuters poll showed.
While Fed rate cuts are generally positive for emerging market assets, Yan Wang, chief emerging markets and China strategist at Alpine Macro, said China's domestic macroeconomic policies and growth outlook are far more critical than the Fed's actions.
Shen Zhengyang, investment advisor at Northeast Securities, said sustainability of the market rebound hinges on the strength of China's easing measures.
"If China slashes benchmark lending rates, cuts mortgage rates for existing loans, lowers RRR, and issue more bonds to aid the economy, the stock market may bounce 5-10%," Shen said.
The CSI Real state Index .CSI000952 and CSI Liquor Index .CSI399997 gained 3.5% and 2.7% respectively.
The consumer staples sector .CSI000912 rose 1.2%, the healthcare sub-index .CSI300HC added 1%, and the financial sector sub-index .CSI300FS was higher by 0.5%.
Over in Hong Kong, the city's Monetary Authority on Thursday cut its base rate charged via the overnight discount window by 50 basis points to 5.25%.
Hong Kong's monetary policy moves in lock-step with the United States as the city's currency HKD=D3 is pegged to the greenback in a tight range of 7.75-7.85 per dollar.
Hong Kong-listed mainland property stocks .HSMPI advanced 5.5% while local real estate firms .HSNP were up 2.3% after the interest rate cuts.
Reporting by Summer Zhen and Samuel Shen
Editing by Shri Navaratnam and Mrigank Dhaniwala
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