[ET Net News Agency, 19 December 2024] The Federal Reserve cuts interest rates by 0.25%
as expectation, the Hong Kong Monetary Authority follows suit by decreasing the discount
window base rate by 0.25%. However, despite this, the dot plot shows that Federal Reserve
officials anticipate only two rate cuts next year. As a result, the Asia-Pacific stock
markets collectively declined, with the Hang Seng Index closing at 19,666 at midday, down
198 points or 1%, breaking below the 20-day moving average (around 19,733 points).
Property stocks in Hong Kong led the decline, while technology and real estate stocks also
weakened. The Hang Seng China Enterprises Index reported 7,117, down 63 points or 0.9%.
The Hang Seng Tech Index reported 4,409, down 58 points or 1.3%. The turnover on the main
board of the Hong Kong stock market exceeded HKD 65.4 billion Hong Kong dollars.

"Hong Kong stocks may test 19,000 in the short term, focus on the People's Bank of China's
LPR rate announcement"

Wan Kong Shing, the Chief Investment Officer of iFAST Global Market, told ET Net News
Agency that the change in expectations for a Federal Reserve rate cut led to a setback in
US stocks, further dragging down the performance of Hong Kong stocks. In the short term,
Hong Kong stocks may test relatively lower levels around 19,000 points. Regarding whether
Hong Kong stocks will face more challenges after Trump takes office, it depends on the
diplomatic situation between the central government and the United States. Currently, Hong
Kong stocks have lower valuations, and the market is somewhat prepared for this, limiting
the room for significant declines, with fluctuations expected between 18,000 and 21,000
points.
Jaseper Tsang, the investment director of Rafter Capital, stated that Hong Kong stocks
will inevitably have to digest the impact of the changing expectations for a US rate cut.
However, Hong Kong stocks are more influenced by expectations of Mainland China policies.
The market is currently anticipating the introduction of stimulus policies related to
consumption and the property market by the Mainland China around the time of the two
sessions. Jaseper Tsang expects that before Trump's formal inauguration, Hong Kong stocks
will fluctuate between 18,800 and 20,500 points. The lower limit of 18,800 points is
considered as the Hang Seng Index has been around 19,000 points recently, and due to the
impact of derivative activities, the stock market may experience fluctuations of around
two to three hundred points.
Moreover, the People's Bank of China is set to announce the new LPR rate tomorrow
(20th), with the market eagerly awaiting whether the monetary authorities will
unexpectedly cut interest rates, although there is a general expectation that the PBOC
will first reduce the reserve requirement ratio.

"As the peak travel season approaches, airline stocks can be acquired at a lower price"

As the US dollar slows its rate-cutting pace and the Renminbi weakens, the offshore
Renminbi hits a two-year low. Wan Kong Shing mentioned that whether currency-sensitive
stocks need careful deployment depends on the industry situation. For example, airline
stocks may be worth considering for acquisition as the peak travel season approaches.
However, caution is advised as some airline stocks heavily rely on foreign debt for
aircraft purchases. Passenger airlines, if able to maintain good profitability, are
relatively less affected by Renminbi depreciation or US dollar appreciation. Conversely,
sectors with more foreign debt, such as real estate stocks, are more negatively impacted
by Renminbi depreciation and should be avoided. Chinese financial stocks, due to some
Mainland China institutions issuing US dollar bonds, may also face certain pressures, with
recent declines in financial stocks being relatively pronounced.
Jaseper Tsang also pointed out that given Trump's potential reinforcement of trade
protectionism after taking office in January next year, shipping and export-related stocks
will continue to face significant adverse impacts. Therefore, he does not currently
recommend investors to buy these types of shares.

"Pressure on Hong Kong property market due to last-minute slowdown in easing"

The slowdown in the US dollar rate cuts is limited by the slower pace of the Federal
Reserve's rate cuts, making it difficult for mortgage costs to decrease in the future,
hindering the recovery of Hong Kong property next year. Jaseper Tsang stated that the
Federal Reserve rate cuts have always been a catalyst for the property market, with high
expectations for aggressive rate cuts by the Federal Reserve. Slowing down the rate cuts
can be likened to the 'last straw that breaks the camel's back.' In addition, poor overall
economic conditions and the lack of improvement in the Mainland China property market will
further hamper the Hong Kong property market. Wan Kong Shing stated that although the
slowdown in rate cuts is bearish for the property market, considering the current level of
the property market, further downside is limited, expected to be around 10%. However, he
emphasized that while the property market has seen less significant declines recently due
to reduced speculation about rate cuts, future declines may be limited as previous
increases were also restrained.