HSI Heads South On Lower Rate-cut Hopes

Hong Kong shares sank on Monday, in line with a sell-off across Asia, after a better-than-expected US jobs report slashed expectations the Federal Reserve will announce a big interest rate cut this month.

The Hang Seng Index shed 1.54 percent to 28,331.

Heavyweight Tencent slid 2.5 percent, Ping An Insurance dropped more than 1 percent, and AIA shed almost 2 percent.

Property shares were battered, with Sun Hung Kai Properties falling 1.5 percent, Country Garden plunging 3.2 percent and Swire Pacific losing 2.9 percent.

The benchmark Shanghai Composite Index tumbled 2.58 percent to 2,933, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, lost 2.9 percent to 1,554.

Other regional markets also fell.

Taiwan finished 0.3 percent lower and the Nikkei index in Tokyo gave up 1 percent.

Seoul sank 2.2 percent, hit by a simmering trade row between South Korea and Japan. Tokyo last week imposed restrictions on exports used by South Korea's tech companies in a dispute over court rulings linked to Japan's wartime forced labour policy. Samsung fell 2.8 percent and LG Display sank almost 5 percent.

Sydney, Singapore and Mumbai each sank more than 1 percent.

Investors had been hoping the Fed would cut borrowing costs by as much as 50 basis points at its next policy meeting at the end of the month, but Friday's report reduced the chances of that happening.

"Markets remain convinced the Fed will cut rates at the end of the month," said OANDA senior market analyst Edward Moya.

"But the strong labour market has many questioning whether we will see just two rate cuts in 2019 and not what some call the required three to see US stocks make another 3-5 percent push higher into uncharted territory."

He added that the focus will now turn to Fed boss Jerome Powell's congressional testimony this week, with investors hoping he will provide some forward guidance on the bank's plans.

"The testimony this week will be crucial around how they are seeing the evolution of the US economy," Anne Anderson, at UBS Asset Management, told Bloomberg TV.

Also up this week is the release of minutes from the Fed's June meeting, while US and Chinese officials are working to schedule top-level trade talks. (AFP)