Surge in Hang Seng Index: Closes Above 18,000 Post Fed Rate Cut, Marking a Two-Month High

The Hang Seng Index in Hong Kong surpasses 18,000, marking a first in two months, following a half-point reduction in the Federal Reserve's standard rate. This significant increase in the Hang Seng Index, which has not been seen for two months, comes in the wake of the Fed's decision to slash its key rate by 0.5%.

The Hang Seng Index saw a 2% increase, closing at 18,013.16, surpassing the 18,000 mark for the first time since July 15. This surge, the most significant since July 31, occurred on Thursday. In the meantime, the Hang Seng Tech Index experienced a boost of 3.3%, while the Shanghai Composite Index rose by 0.7%.

The Federal Reserve's initial reduction in rates, the first in over four years, was followed by anticipation for a further decrease of half a point by the year's end. Those dealing with rates predicted a 70 basis points cut; however, Federal Reserve Chairman Jerome Powell dismissed the notion of more substantial rate cuts in the future. The S&P 500 Index momentarily hit a record high before it ended 0.3 percent down overnight.

Ray Sharma-Ong, the head of multi-asset investment solutions for Southeast Asia at abrdn, explained that the 50 basis-point rate cut made by the Fed is seen as a readjustment of policy rates, not as a marker of worry about the stability of the job market. At present, the market is recalibrating based on the Fed's advice of 'readjustment.' Despite this, Sharma-Ong suggests the potential for a lean towards further relaxation, and a possible quicker pace of rate normalization by the Fed, as hinted by the median dot.