Asia Markets Rebound On Fed's Rate Cut
Hong Kong shares surged Wednesday, rebounding with a vengeance from the market's recent plunge as investors welcomed a hefty, surprise interest rate cut overnight by the U.S. Federal Reserve.
The blue chip Hang Seng index soared 2,332.54 points, or 10.7 percent, to 24,090.17, regaining a major portion of the 13.7 percent it had shed over the previous two days.
Analysts said the U.S. interest rate cut helped restore confidence and investors were bargain hunting.
"The world market, including Hong Kong, is rising in reaction to the U.S. rate cut," said Francis Lun, a general manager at Fulbright Securities. Hong Kong stocks had been oversold about 15 percent, Lun said, and investors who had earlier gambled the market would fall were now covering those bets by buying back into the market.
Wednesday's rebound came after the U.S. central bank cut a key interest rate by three-quarters of a percentage point to 3.5 percent, hoping to shore up the sagging U.S. economy that many fear is sliding into a recession.
Later Wednesday in Washington, top House leaders will continue talks with Treasury Secretary Henry Paulson on a plan to try to jolt the economy out of its slump, with tax rebates likely to be the centerpiece of discussions.
Fears of slower U.S. growth have battered Asian markets since the start of the year, leading to huge sell-offs on Monday and Tuesday.
Other regional markets also cheered the Fed's move, with Japan's key stock index gaining 2 percent after plunging 5.7 percent Tuesday. South Korea's composite stock index finished with a 1.2 percent gain.
Analyst Lun said Hong Kong shares have been falling the past three months due to external factors and that he thinks the market has reached its bottom.
"It's time to recover, but investors still need to be cautious because the fluctuation now is too big," he said.
Hong Kong property firms led Wednesday's gains as they will be major beneficiaries of the interest rate cuts. Hong Kong's monetary authority - or the de facto central bank - has already matched the U.S. Fed cut, and several banks, including HSBC, have followed suit.
Hong Kong's interest rates tend to track those in the U.S. as the local currency is pegged to the U.S. dollar.
Sun Hung Kai Properties gained 9.39 percent to HK$155. Cheung Kong climbed 10.61 percent to HK$130.3.