Hong Kong stocks retreated from a four-month high on Thursday after a rally that sent a key gauge of Chinese technology stocks into a bull market took a breather, as investors pared bets because of the Federal Reserve’s hawkish interest-rate outlook.
The Hang Seng Index fell 0.2 per cent to 21,814.37 at the close. The Hang Seng Tech Index, which has benefited from most of the gains driven by the DeepSeek frenzy, lost 0.9 per cent. It reversed a gain of as much as 4.2 per cent, which briefly lifted the gauge past a September high after China announced a broad rescue package to prop up the stock and property markets.
On the mainland, the CSI 300 Index and the Shanghai Composite Index both slipped 0.4 per cent.
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Smartphone maker Xiaomi and personal computer maker Lenovo Group led losses among tech names, losing at least 5 per cent. Chipmaker Semiconductor Manufacturing International Corp (SMIC) also fell after Bocom International downgraded the stock to neutral. Alibaba Group Holding maintained momentum, extending its biggest gain in more than two years.
Federal Reserve chair Jerome Powell told lawmakers on Wednesday about the Fed’s continuing efforts to tame inflation. Photo: Getty Images via AFP alt=Federal Reserve chair Jerome Powell told lawmakers on Wednesday about the Fed’s continuing efforts to tame inflation. Photo: Getty Images via AFP>
“In the near term, the re-rating process has been fully priced in,” said Zhang Jiqiang, an analyst at Huatai Securities in Beijing. “The rebound may have started to take a pause now.”
The Hang Seng Index had risen 16 per cent from a January low through Wednesday, while the tech gauge surged 25 per cent, as Chinese start-up DeepSeek’s AI model spurred a revaluation of the nation’s biggest tech stocks leading to frenzied buying by investors. The 14-day relative strength index of the tech gauge rose to 72 on Wednesday – a reading above 70 typically signals a correction.
The S&P 500 Index fell 0.3 per cent overnight, as traders now expect only one Fed rate cut this year after a resurgence in inflation. Fed chair Jerome Powell said he saw the need to keep interest rates higher for longer as much work was required to tame inflation. Consumer prices rose 0.5 per cent month on month in January, the biggest increase since August 2023.