Hong Kong stocks are gearing up for an eventful Thursday, when a decision on interest rates by the US Federal Reserve will coincide with an initial public offering (IPO) poised to be the city’s largest in seven years, testing investors’ appetite for risk. An unexpected increase in US borrowing costs, or even a hawkish tone from new US Fed chairman Kevin Warsh, risks derailing a fragile rebound in Hong Kong stocks, which was aided by a rotation out of high-priced artificial intelligence bets in neighbouring markets. The IPO for Zhongji Innolight, the Chinese maker of optical transceivers used in AI data centres, may add another layer of uncertainty at the start of trading in Hong Kong, as the public listing drains about US$8 billion from elsewhere in the markets. The Fed rate policy meeting will be closely scrutinised by investors in both Hong Kong and abroad. Anticipation over monetary tightening is driving US Treasury yields higher and upending technology stocks trading at stretched valuations.