Rate fears put Hong Kong and mainland stocks under pressure

Hong Kong and mainland Chinese stocks face heightened volatility as investors await U.S. inflation data and shifts in Japanese monetary policy. A higher-than-expected reading could increase expectations for higher U.S. borrowing costs.

A strengthening yen is also threatening the yen-funded carry trade, in which investors borrow cheaply in Japan to buy higher-yielding assets elsewhere. Analysts said elevated U.S. Treasury yields and a reversal of that strategy could weigh especially heavily on Hong Kong stocks, which are more sensitive to overseas capital flows.

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