March 4, 2020 / 5:28 AM / 3 months ago

China, HK stocks flat despite Fed rate cut

SHANGHAI, March 4 (Reuters) - China and Hong Kong stocks were flat on Wednesday as fewer new coronavirus cases offset negative cues stemming from Wall Street’s sharp drop following the U.S. Fed’s surprise rate cut.

** The CSI300 index was unchanged at 4,092.60 points at the end of the morning session, while the Shanghai Composite Index gained 0.1% to 2,994.80 points. ** The markets were calm despite sharp losses overnight on Wall Street after the U.S. Federal Reserve surprised investors with a half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus’ impact on the economy. ** The rate reduction underscored the U.S. central bank’s concern about the new coronavirus, which has spread around the world after emerging late last year in China. It came two weeks ahead of a scheduled policy meeting, where traders had fully priced in a 50-basis-point cut. ** China’s central bank kept short-term borrowing costs steady on Wednesday, shrugging off the U.S. Federal Reserve’s emergency policy rate cut. ** But markets widely believe Chinese authorities will continue to move to lower financing costs for business and roll out powerful measures prop up the economy, which has been hit by a coronavirus outbreak. ** The People’s Bank of China’s approach is not closely following Fed’s move, as it will take its own proactive steps depending on the situation here, said Xiao Shijun, an analyst with Guodu Securities. ** The A-share market is relatively safe for now, as its valuations are reasonable and low historically and globally, while the bull run in the U.S. stock market has continued for more than 10 years, he said, referring to major indexes’ strength on Wednesday. ** Latest bleak data also reinforced expectations of further stimulus to shore up the world’s second-largest economy. ** China’s services sector had its worst month on record in February as new orders plummeted to their lowest level since the global financial crisis, a business survey showed on Wednesday, with economists urging swift support to avoid mass bankruptcies. ** Adding to calmness were fewer number of new coronavirus cases in mainland China on Tuesday. ** In Hong Kong, the Hong Kong Monetary Authority (HKMA) lowered its base rate charged through the overnight discount window by 50 basis points to 1.5% on Wednesday, hours after the U.S. Federal Reserve delivered a rate cut of the same margin. ** The coronavirus epidemic dealt a severe blow to businesses in Hong Kong in February, with activity plummeting to the lowest on record, a private survey showed on Wednesday, in a sign of a sharp economic downturn in the first quarter.

** China’s CSI300 financial sector sub-index was higher by 0.74%, the consumer staples sector up 1.43%, the real estate index up 3.56% and the healthcare sub-index down 0.19%.

** Chinese H-shares listed in Hong Kong rose 0.61% to 10,549.29, while the Hang Seng Index was up 0.12% at 26,317.56.

** The smaller Shenzhen index was down 0.19% and the start-up board ChiNext Composite index was weaker by 0.66%.

** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.36% while Japan’s Nikkei index was up 0.28%. (Reporting by Luoyan Liu and Andrew Galbraith; Editing by Maju Samuel)

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