Hang Seng Index: Gains Persist Amid China’s MLF Decision and US Tariff Fears

US Markets: Wall Street Ends the Week on a High Note

On Friday, November 22, US equity markets extended their gains from the Thursday session. The Nasdaq Composite Index rose 0.16%, and the S&P 500 gained 0.35%, while the Dow rallied 0.97%.

Boeing (BA) advanced by 4.09% on expectations of a brighter outlook under Trump’s presidency. However, Alphabet Inc. (GOOGL) extended its losses from Thursday on the news of the US DoJ pushing for the firm to sell Chrome. Nvidia (NVDA) also trended lower after last week’s warning of supply constraints lasting until 2026.

US Private Sector PMIs Signal a Robust Economy

On Friday, US private sector PMI data gave further signals of a robust US economy. The US Services PMI increased from 55.0 in October to 57.0 in November. Accounting for around 80% of the US GDP, the upswing in service sector activity painted a rosy picture of the economy.

Market optimism toward the economy and the prospect of a pro-business Trump administration boosted demand for riskier assets. Furthermore, rising optimism offset concerns about the Fed rate path. Last week, the probability of a December Fed rate cut fell from 61.9% on November 15 to 56.2% on November 22.

PBoC Keeps the 1-Year MLF Rate Steady at 2%

On Monday, November 25, the People’s Bank of China maintained the 1-year Medium Term Lending Facility (MLF) Rate at 2%. The PBoC’s decision to keep the MLF rate at 2% impacted buyer demand for Mainland China-listed stocks.

Concerns about US tariffs on Chinese goods have increased market sensitivity to China’s central bank and Beijing’s policy maneuvers. Investors await fresh stimulus measures targeting domestic consumption to counter the potential impact of US tariffs on China’s economy.

Expert Takes on US-China Relations

How would a US-China trade war impact the world’s largest economies?

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero recently remarked on the potential implications of a US-China trade war, stating,

“You may think that trade decoupling between China and the US will be costly but probably not as much as a financial decoupling. Here is how it may look: Trump orders state agencies to divest from China (Texas starting!), then the private sector. China retaliates and stops buying US Treasuries.”

Garcia Herrero expressed hope that the Wall Street nominations would counsel Trump against such drastic measures, potentially harmful to both countries.

Hang Seng Index and Mainland China Markets Diverge

In Asian markets, the Hang Seng Index advanced by 0.49% on Monday morning. Autos, real estate, and tech stocks contributed to the early gains. However, the PBoC rate decision and concerns about US tariffs could test buyer appetite for riskier assets.

Tech giants Baidu (9888) and Alibaba (9988) advanced by 1.57% and 0.93%, respectively. BYD Electronic International (0285) rallied 2.19%, while Li Auto (2015) was up 2.16%.

In contrast, Mainland China’s equity markets trended lower in response to the PBoC’s rate decision. The CSI 300 and the Shanghai Composite were down by 0.23% and 0.20%, respectively.

Nikkei Index Ignores Stronger Japanese Yen

Japan’s Nikkei Index rallied 1.48% on Monday morning, tracking Friday’s Wall Street gains. Significantly, investors brushed aside a stronger Japanese Yen, which saw the USD/JPY pair decline by 0.64% to 153.712.

10-year US Treasury yields declined on Monday morning, following Friday’s pullback, driving demand for riskier assets.

Tech stocks Softbank Group Corp. (9984) and Tokyo Electron (8035) jumped by 3.46% and 3.62%, respectively. However, Nissan Motor Corp. (7201) slipped by 0.20%, feeling the effects of a stronger Japanese Yen.

ASX 200 Kickstarts the Week with New All-Time High

In Australia, the ASX 200 Index gained 0.69% on Monday morning. Friday’s gains on Wall Street drove the Index to a new all-time high. Mining and tech stocks contributed to the morning session gains.

The S&P/ASX All Technology Index (XTX) advanced by 1.16%. Wisetech Global Ltd. (WTC) rose by 1.04%, partially recovering Friday’s 12.37% reversal. Bell Porter reaffirmed its buy rating, boosting demand for WTC stock.

Mining giants Fortescue Metals (FMG) and Rio Tinto Ltd. (RIO) were up 2.24% and 0.87%, respectively. On Friday, iron ore spot prices advanced, driving buyer appetite for mining stocks.

However, gold-related stock Northern Star Resources Ltd. (NST) declined by 0.14% as gold spot prices retreated in the morning session. Gold was down 0.70% to $2,697.

Outlook

Investors should monitor central bank commentary, China’s stimulus maneuvers, and the Ukraine conflict. Stimulus measures from Beijing to boost domestic consumption could counter concerns about US tariffs, potentially driving demand for riskier assets. Follow our latest updates to stay informed and manage your risks effectively.