(Updates to market close)

By Summer Zhen

HONG KONG, March 22 (Reuters) – China and Hong Kong stocks rallied for a second day after U.S. banking stocks rebounded overnight on hopes that a global banking crisis has been averted for now, while investors waited for the Federal Reserve’s monetary policy decision later in the day.

** China’s blue-chip CSI 300 Index were up 0.43%, while the Shanghai Composite Index climbed 0.31%.

** Hang Seng Index jumped 1.73%, while Hang Seng China Enterprises Index gained 1.38%.

** China’s President Xi Jinping left Russia on Wednesday. During his two-day visit Xi barely mentioned the Ukraine conflict and said on Tuesday in final remarks that China had an “impartial position”.

** U.S. banks were higher overnight after Treasury Secretary Janet Yellen said that she is prepared to intervene to protect depositors in smaller U.S. banks suffering deposit runs.

** Ahead of the Fed interest rate decision, risk-on sentiment was charged up. Michael Dyer, investment director of M&G Investment said this time round clearly the Fed is closer to the end of their hiking cycle than the beginning.

** “We witnessed a material shift in both expected terminal value of Fed policy and the potential for cuts in the latter part of the year,” he said, but stressing that “it would be naïve to assume that inflation is no longer a serious headache for the Fed.

** High uncertainty over the interest rate outlook remains – Hong Kong overnight interbank offer dropped the most in over three years on Wednesday, down 174.5 basis point (bps) to 2.39786% and retracing from a near four-month high of 4.14286% seen on Tuesday. One-month interbank rate also fell 13 bps to 3.36887%.

** “The easing concerns of AT1 bonds sell-off and the pricing-in of Fed’s potential dovish tone have helped the market sentiment,” said Dickie Wong, director of research at Kingston Securities.

** Hong Kong bank stocks rebounded. Standard Chartered jumped 3.7% and HSBC rose 3.1%.

** Hong Kong-listed tech giants climbed 1.1%. Alibaba Group gained 3%.

** In China A-shares, 5G communication and CS AI index advanced 3.6% and 2.9% respectively to lead the gains. (Reporting by Summer Zhen; Editing by Nivedita Bhattacharjee)