Hong Kong stocks rose, extending a three-week winning run, on optimism borrowing costs will decline from as early as next month, after the Federal Reserve gave its strongest hint yet on an imminent change in policy.

The Hang Seng Index rose 0.8 per cent to 17,756.09 at the local noon trading break, adding to a 1 per cent advance last week. The Tech Index gained 0.6 per cent while the Shanghai Composite Index slipped 0.3 per cent.

Property developer Longfor Group gained 2.4 per cent to HK$8.69 and Wuxi Biologics surged 4.7 per cent to HK$10.74. Ping An Insurance added 2 per cent to HK$36.25 and sportswear maker Anta rose 3.2 per cent to HK$71.25.

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Search-engine operator Baidu led winners among Chinese tech stocks, adding 2.1 per cent to HK$83.90, while Tencent climbed 1.2 per cent to HK$380.20. Alibaba Group Holding erased gain, slipping 0.1 per cent to HK$82.60. Its listing status will be converted to dual-primary from August 28.

Markets received a shot in the arm after Fed Chair Jerome Powell signalled on Friday that US policymakers are ready to make a move. The Fed raised its target rate 11 times from the lift-off in March 2022 to July last year, and has kept it unchanged in nine meetings since then. Its next rate-setting meeting is on September 17-18.

"The time has come for policy to adjust," Powell said in a speech at the Kansas City Fed's annual meeting in Jackson Hole, Wyoming. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

The Hong Kong Monetary Authority follows the Fed's policy decision in lockstep under its Linked Exchange Rate system to preserve its currency peg.

"For Hong Kong, it will continue to be a very US and macro-driven week," said Gary Ng, a senior economist at French investment bank Natixis. "It is no longer about whether the Fed will cut in September, but the motive behind the decision." A larger than 25-basis point cut may be too soon to expect, he added.

Stocks also gained before government report later this week that may show Chinese manufacturing improved in August, despite remaining in contraction zone. The official PMI manufacturing index is expected to increase to 49.7 this month from 49.4 in July, according to economists at Goldman Sachs.

Elsewhere, Japan's Nikkei 225 Index fell 0.8 per cent, while Australia's S&P/ASX 200 advanced 0.7 per cent and South Korea's Kospi was little changed.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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