Hang Seng Index: Beijing’s Policies Fuel Gains Amid Tariff Relief – Weekly Recap

Dow and Nasdaq Soar: Is a Fed Rate Cut Driving the Rally?

It was an eventful week in the global markets, with US President Trump’s policies and economic indicators driving market trends.

US equity markets extended gains in the week ending January 24. The Dow rallied 2.15%, while the Nasdaq Composite Index and the S&P 500 rose 1.65% and 1.74%, respectively.

Trump’s Big Moves: From Tariff Threats to Job-Creating AI Ventures

President Trump’s initiatives boosted sentiment. Notable developments included:

• Stargate joint venture, comprising OpenAI, Oracle (ORCL), and Japan’s SoftBank. The JV is tasked with building data centers, potentially creating over 100,000 jobs.
• While Trump initially threatened 10% tariffs on Chinese goods, he later softened his stance, stating he would rather avoid tariffs.
• Called on the Fed and central banks globally to lower interest rates.

While lower Treasury yields reflected expectations of Fed rate cuts, rising services inflation raised concerns about potential delays in monetary policy easing. 10-year US Treasury yields dipped by 0.13% after sliding by 2.94% in the previous week.

Fed Rate Cuts in Jeopardy? Rising Services Inflation Tests Optimism

While the primary focus was on Trump’s inauguration and policies, US services sector data tested market optimism regarding a Fed rate cut.

The US S&P Global Services PMI dropped from 56.8 in December to 52.8 in January. Markets attributed the sharp fall in business inflows to adverse weather and rising costs. Notably, services sector inflation rose at its most marked pace since September. As a significant contributor to headline inflation, the upswing in prices could drive inflationary pressures, potentially delaying Fed rate cuts. The US equity markets responded to the data, trending lower on January 24.

Hong Kong and Mainland China Markets React to Tariff News

US President Trump initially spooked investors, threatening 10% tariffs on Chinese goods, potentially effective February 1. However, Trump changed tack later in the week, stating,

“Conversation with China’s Xi went fine. Would rather not have to use tariffs over China.”

Hopes of the US and China avoiding a trade war boosted market sentiment.

Beijing Policies Fuel Demand for Mainland China Stocks

Beijing’s trade-in program for mobile devices and other electronics, announced on January 15, became effective on January 20. The program aims to boost domestic consumption amid the ongoing transition to a consumption-driven economy.

The People’s Bank of China (PBoC) also buoyed risk sentiment amid shifting views toward US tariffs. On January 23, the PBoC lowered the downpayment for stock repurchase financing from 30% to 10% and extended loan terms from one year to three years.

The announcement had the desired effect. Reportedly, over 300 listed Chinese companies revealed plans to apply for stock buyback loans under the new terms. Share buybacks reduce supply, potentially driving stock prices higher.

Tech Stocks Dominate: Alibaba, Tencent Lead Hang Seng Gains

The Hang Seng Index rose 2.46% in the week ending January 24, extending its gains from the previous week. Market sentiment toward Trump’s policies, a potentially less hawkish Fed, and Beijing’s policy moves boosted demand for Hong Kong and Mainland China-listed stocks.

The tech sector led the gains, with the Hang Seng Tech Index advancing by 3.98%. Alibaba (9988) surged by 4.95%, while Baidu (9888) and Tencent (0700) posted weekly gains of 3.69% and 2.91%, respectively.

However, China’s housing sector troubles continued to affect demand for real estate stocks. The Hang Seng Mainland Properties Index slid by 2.05%.

China’s Mainland equity markets closed the week in positive territory. The CSI 300 and Shanghai Composite rose 0.54% and 0.33%, respectively. President Trump’s tariff flip-flops led to modest gains.

For more analysis on the Hang Seng Index and global market trends, click here.

Commodities See Mixed Trends

Commodities had a mixed week ending January 24. Gold extended its winning streak to four weeks, rising 2.54% to close the week at $2,771. Expectations of Trump’s policies fueling inflation reinforced gold’s position as an inflation hedge.

US tariff developments led iron ore spot prices to rise 0.23% higher, while crude oil prices declined as investors reacted to Trump’s plans to ask OPEC nations to cut oil prices.

ASX 200 Powers Ahead: Banks and Tech Stocks Shine Despite Oil Slide

Australia’s ASX 200 rose 1.19% in the week ending January 24, advancing for the third week. Banking and tech stocks contributed to the gains. The S&P/ASX All Technology Index rallied 3.38%.

Falling US Treasury yields increased the appeal of Aussie banks to yield-focused investors. Notable movers included the National Australia Bank (NAB), up 4.29%, while the Commonwealth Bank of Australia advanced by 3.09%.

Meanwhile, Woodside Energy Group (WDS) tumbled 4.93% on oil price concerns.

Nikkei Index Rallies on Trump’s AI Initiative and Tariff Stance

In the week ending January 24, the Nikkei Index rallied 3.26% despite a stronger Japanese Yen. Trump’s tariff stance and focus on the AI and tech sectors countered the effects of a Bank of Japan rate hike and a pullback in the USD/JPY pair. The USD/JPY pair dropped 0.20% to 155.948 in the week.

On January 24, the BoJ raised interest rates by 25 basis points to 0.50%. BoJ Governor Kazuo Ueda stated,

“The timing and pace of adjusting monetary support will depend on economic and price developments at the time. We don’t have any preset idea. We will make a decision at each policy meeting by looking at economic and price developments as well as risks.”

The BoJ Governor was optimistic about wage growth while flagging uncertainties surrounding the potential impact of US tariffs. The widely anticipated rate hike and forward guidance ensured the markets avoided another Yen carry trade unwind.

Notable movers included Softbank Group (9984), which surged 16.30% in response to the Stargate announcement. Tokyo Electron (8035) gained 1.80%.

However, the stronger Yen could weaken earnings and valuations, pressuring Japan’s export-linked stocks. Nissan Motor Corp. (7201) declined by 0.78%.

Outlook for Volatility: Key Events to Watch This Week

Markets face potential volatility this week, with a focus on Chinese data, US economic indicators, and central bank policies. Renewed tariff threats or hawkish monetary stances could dampen sentiment. However, targeted Chinese stimulus may offset downside risks. For the ASX 200, inflation data will be pivotal in shaping the RBA’s rate path.

Traders should closely monitor economic trends to navigate shifting dynamics.