[ET Net News Agency, 25 April 2025] The President of the Cleveland Federal Reserve, Beth Hammack, ruled out the possibility of a rate cut by the Federal Reserve in May, but hinted at the chance of a cut in June. Global stock markets generally performed well, with the Hang Seng Index reversing its decline from yesterday, opening 170 points higher at 22,206, up 297 points or 1.4%, with turnover close to HKD 116.4 billion. The Hang Seng China Enterprises Index was at 8,160, up 104 points or 1.3%. The Hang Seng Tech Index was at 5,068, up 92 points or 1.9%.
"Yuen Che Hay: US rate cuts only provide short-term benefits for Hong Kong stocks"
The Hong Kong stock market opened above the 20-day moving average (21,889 points). Yuen Che Hay, the Co-Director of Investment Strategy of Quam Asset Securities, told ET Net News Agency that signs of easing in Sino-US relations, along with the Federal Reserve officials adopting a dovish stance, have driven the Hang Seng Index up again today. However, the outlook for Sino-US relations remains pessimistic, and the rebound in Hong Kong stocks is likely to be limited. He noted that whether the Fed adopts a dovish stance now or actually cuts rates in the future, it will only help with short-term capital costs and the stock market. With the US imposing a 245% tariff, even negative interest rates would struggle to resolve China's foreign trade difficulties.
Regarding Sino-US trade negotiations, there are conflicting statements from both sides. US President Trump stated that discussions on resolving trade issues took place on Thursday (24th), emphasising ongoing communication between both parties. Yuen Che Hay believes that while there may be low-level meetings between officials, the likelihood of reaching an agreement is very slim. According to the Chinese Ministry of Commerce, even with recent market speculation that the US might reduce tariffs on China to 20-30% after reaching an agreement, this would still be unacceptable to China. China's stance indicates they will not accept tariffs, so there seems to be no possibility of an agreement at present. Yuen Che Hay pointed out that China clearly demands equal tariffs from both sides, meaning zero tariffs from the US towards China, which is nearly impossible for Trump to accept.
As for the Hang Seng Index's performance, Yuen Che Hay mentioned that in the short term, it could aim for the gap high of 22,849 points before the significant drop on 7 April. However, stabilising above 23,000 points would be challenging. The 20-day moving average has not yet provided support, with initial support seen at the 21,000 mark.
"The Sino-US trade war is severe, and the Politburo meeting is unlikely to stimulate the stock market"
The Mainland China will hold a Central Politburo meeting, expected to discuss economic issues and the outlook for the tariff war. Today, the Mainland China property sector has already seen a surge. Yuen Che Hay stated that due to the impact of the trade war on exports, some export businesses need to shift towards domestic sales. He believes the Central Politburo meeting will still focus on the domestic demand sector to stimulate consumer spending. He anticipates that the central government may introduce policies such as consumer vouchers, trade-ins for home appliances and cars, and tourism-related measures, but the policy content is unlikely to be innovative. Yuen Che Hay advises investors to consider stocks in the catering and tea industries, which focus on domestic sales, but to be cautious with home appliance stocks due to their export exposure. He cautioned that while these policies may stimulate domestic demand stocks, they are unlikely to fundamentally change the economic situation, so expectations for the actual effects of the policies should be tempered.
Citi predicts that the meeting will propose around RMB 1.5 trillion in additional fiscal stimulus, but Yuen Che Hay believes that no specific figures will be announced, and it is unlikely to have a significant stimulating effect on the stock market.
Market forecasts suggest that the People's Bank of China may lower the reserve requirement ratio around the time of the Politburo meeting, with a 20 basis point rate cut potentially coming in May or June. Yuen Che Hay admitted that while there may be a rate cut or reserve requirement reduction around the time of the Politburo meeting, it is merely an attitude adjustment with limited actual impact, as the current issue is not the cost of borrowing, but rather the lack of borrowing. This news may help heavily indebted property firms, but it offers little assistance to real industries. The challenges businesses will face include disrupted imports of raw materials and stagnant product sales, with monetary policy unlikely to provide much help.
"Yuen Che Hay: US rate cuts only provide short-term benefits for Hong Kong stocks"
The Hong Kong stock market opened above the 20-day moving average (21,889 points). Yuen Che Hay, the Co-Director of Investment Strategy of Quam Asset Securities, told ET Net News Agency that signs of easing in Sino-US relations, along with the Federal Reserve officials adopting a dovish stance, have driven the Hang Seng Index up again today. However, the outlook for Sino-US relations remains pessimistic, and the rebound in Hong Kong stocks is likely to be limited. He noted that whether the Fed adopts a dovish stance now or actually cuts rates in the future, it will only help with short-term capital costs and the stock market. With the US imposing a 245% tariff, even negative interest rates would struggle to resolve China's foreign trade difficulties.
Regarding Sino-US trade negotiations, there are conflicting statements from both sides. US President Trump stated that discussions on resolving trade issues took place on Thursday (24th), emphasising ongoing communication between both parties. Yuen Che Hay believes that while there may be low-level meetings between officials, the likelihood of reaching an agreement is very slim. According to the Chinese Ministry of Commerce, even with recent market speculation that the US might reduce tariffs on China to 20-30% after reaching an agreement, this would still be unacceptable to China. China's stance indicates they will not accept tariffs, so there seems to be no possibility of an agreement at present. Yuen Che Hay pointed out that China clearly demands equal tariffs from both sides, meaning zero tariffs from the US towards China, which is nearly impossible for Trump to accept.
As for the Hang Seng Index's performance, Yuen Che Hay mentioned that in the short term, it could aim for the gap high of 22,849 points before the significant drop on 7 April. However, stabilising above 23,000 points would be challenging. The 20-day moving average has not yet provided support, with initial support seen at the 21,000 mark.
"The Sino-US trade war is severe, and the Politburo meeting is unlikely to stimulate the stock market"
The Mainland China will hold a Central Politburo meeting, expected to discuss economic issues and the outlook for the tariff war. Today, the Mainland China property sector has already seen a surge. Yuen Che Hay stated that due to the impact of the trade war on exports, some export businesses need to shift towards domestic sales. He believes the Central Politburo meeting will still focus on the domestic demand sector to stimulate consumer spending. He anticipates that the central government may introduce policies such as consumer vouchers, trade-ins for home appliances and cars, and tourism-related measures, but the policy content is unlikely to be innovative. Yuen Che Hay advises investors to consider stocks in the catering and tea industries, which focus on domestic sales, but to be cautious with home appliance stocks due to their export exposure. He cautioned that while these policies may stimulate domestic demand stocks, they are unlikely to fundamentally change the economic situation, so expectations for the actual effects of the policies should be tempered.
Citi predicts that the meeting will propose around RMB 1.5 trillion in additional fiscal stimulus, but Yuen Che Hay believes that no specific figures will be announced, and it is unlikely to have a significant stimulating effect on the stock market.
Market forecasts suggest that the People's Bank of China may lower the reserve requirement ratio around the time of the Politburo meeting, with a 20 basis point rate cut potentially coming in May or June. Yuen Che Hay admitted that while there may be a rate cut or reserve requirement reduction around the time of the Politburo meeting, it is merely an attitude adjustment with limited actual impact, as the current issue is not the cost of borrowing, but rather the lack of borrowing. This news may help heavily indebted property firms, but it offers little assistance to real industries. The challenges businesses will face include disrupted imports of raw materials and stagnant product sales, with monetary policy unlikely to provide much help.