Hong Kong Stocks Swing on Fed Stimulus Cut, China Funding

Hong Kong stocks swung between gains and losses after the Federal Reserve said it will reduce stimulus amid confidence in the economic recovery, and amid concern higher funding costs in China will hurt growth.

The Hang Seng Index (HSI) fell 0.1 percent to 23,128.34 as of 11:23 a.m. in Hong Kong, after gaining as much as 1.1 percent. About three stocks slid for every two that rose on the 50-member gauge. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, declined 0.5 percent to 10,912.59.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The equity gauge jumped 1.7 percent yesterday to a record high after the Fed said it will trim monthly bond purchases to $75 billion from $85 billion in January, citing improvement in the labor market. The central bank said it may hold rates near zero even if unemployment falls below the 6.5 percent rate it earlier cited as a catalyst for an increase.

China’s interest-rate swaps hit a record as the central bank refrained from injecting cash into the financial system at a time when demand for funds is climbing. The seven-day repo rate, a gauge of funding availability in the banking system, posted its biggest jump yesterday since a record cash crunch in June.

The Hang Seng Index climbed 17 percent from its June low through yesterday on signs China’s economy is stabilizing. The measure traded at 11.02 times estimated earnings yesterday, compared with 16.04 for the S&P 500. The H-share index climbed 24 percent from this year’s low on June 25 after China unveiled sweeping reform plans.

The U.S. Senate yesterday sent to President Barack Obama a $1.01 trillion budget deal, lowering the U.S. deficit over 10 years and easing $63 billion in automatic spending cuts.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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