Chinese Stocks Rocked Ahead of Fed's Interest Rate Decision: What's Going On?

China-based stocks took a hit on Wednesday, as the market awaits the Federal Reserve’s decision on interest rates at 2:00 p.m. EDT.

The Hang Seng Index closed down 1.79% at 336.80 HKD, causing Alibaba Group Holdings, Ltd BABA and Baidu, Inc BIDU to open lower and continue to decline intraday. A number of other Chinese blue-chip stocks slid in tandem.

The Macro Outlook: Consumer price index data released by the U.S. Labor Department last week showed inflation remained elevated above expectations in August, despite four separate rate hikes initiated in March, May, June and July. The news brought fear that the Federal Reserve could hike rates by 0.75% or even by a full percentage point.

The prospect of another large rate hike stoked fears that liquidity could dry up in China’s markets. In contrast to the U.S., the Chinese government is in the process of boosting the economy through quantitative easing.

The yuan also fell to a 26-month low amid China’s continuing strict COVID-19 controls.

The prolonged COVID lockdowns, paired with ongoing and increasing geopolitical tensions, could also prompt tech-giant Apple, Inc AAPL to begin moving some of its iPhone production to India within the next three years, according to a report.

See Also: Fed Expected To Raise Rates To Levels Not Seen Since Before Great Recession: What You Need To Know Before Wednesday's Decision

The Technical Outlook: For technical traders, Alibaba and Baidu look set to continue lower because the stocks have been trading in downtrends since Aug. 26, despite the occasional and expected bounces.

On Wednesday heading in the Fed’s decision, both stocks were forming lower wicks to print possible hammer candlesticks, which indicates a spike may be on the horizon, depending on how the market reacts when the news prints.

For traders interested in technical analysis to guide their investments, there are a variety of tools available, including those from Ninja Trader.

Ninja offers advanced charting and other products as part of its trading suite that is designed to assist investors with navigating the markets. The platform allows its members to automate and execute trades and to test trading ideas through simulation.