China stocks rebound as Fed rate relief lifts easing hopes

China shares rebounded from modest early losses on Thursday, led by gains in real estate developers and consumer goods, as the start of long-awaited US rate cuts raised hopes that Beijing will have more latitude to stimulate the ailing Chinese economy.

China's blue-chip CSI300 Index and Shanghai Composite Index rose 0.8 per cent and 0.7 per cent, respectively.

Hong Kong, which is more sensitive to external monetary conditions, saw its Hang Seng gauge climb 2 per cent to hit a two-month high, while the Hang Seng Tech Index jumped more than 3 per cent.

The US central bank on Wednesday kicked off an anticipated series of interest rate cuts with a larger than usual half-percentage-point reduction.

Investor sentiment perked up as the US rate cut provides Beijing with more room to ease monetary conditions and other policies, with less risk of heaping pressure on the yuan.

China is widely expected to trim its main policy and benchmark lending rates on Friday, a Reuters poll showed.

While Fed rate cuts are generally positive for emerging market assets, Yan Wang, chief emerging markets and China strategist at Alpine Macro, said China's domestic macroeconomic policies and growth outlook are far more critical than the Fed's actions.

Shen Zhengyang, investment advisor at Northeast Securities, said sustainability of the market rebound hinges on the strength of China's easing measures.

"If China slashes benchmark lending rates, cuts mortgage rates for existing loans, lowers RRR, and issue more bonds to aid the economy, the stock market may bounce 5-10 per cent," Shen said.

The CSI Real state Index and CSI Liquor Index gained 3.5 per cent and 2.7 per cent respectively.

The consumer staples sector rose 1.2 per cent, the healthcare sub-index added 1 per cent, and the financial sector sub-index was higher by 0.5 per cent.

Over in Hong Kong, the city's Monetary Authority on Thursday cut its base rate charged via the overnight discount window by 50 basis points to 5.25 per cent.

Hong Kong's monetary policy moves in lock-step with the United States as the city's currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.

Hong Kong-listed mainland property stocks advanced 5.5 per cent while local real estate firms were up 2.3 per cent after the interest rate cuts.