Hang Seng Index: Tech Stocks Lead 2% Rally on China’s Stimulus Boost

US Markets Rally on Investor Optimism

US markets ended the week on a high note, driven by upbeat investor sentiment and expectations for Fed rate cuts. The Nasdaq Composite Index rallied 1.51% on Friday, January 17, while the Dow and the S&P 500 posted gains of 0.78% and 1.00%, respectively.

In the bond markets, 10-year US Treasury yields fell to a low of 4.566% before closing at 4.623%. Last week, 10-year Treasury yields slid from a high of 4.809%, reflecting investor hopes for a more dovish Fed rate path.

The positive sentiment set the tone for Monday’s Asian session as Trump’s inauguration loomed.

People’s Bank of China Maintains Loan Prime Rates

On Monday, January 20, the People’s Bank of China (PBoC) left the one-year and five-year Loan Prime Rates (LPR) unchanged at 3.1% and 3.6%, respectively. There were no surprises, with economists expecting the PBoC to stand pat on policy.

However, market sentiment toward Beijing’s recent stimulus measures targeting consumption boosted investor sentiment.

CN Wire commented on the stimulus move, stating,

“Last week, China announced new subsidy measures for a Trade-in program. JD has launched the “National Subsidy For Purchasing Apple products” campaign.”

Beijing’s trade-in program for mobile devices and other electronics, announced on January 15 and effective January 20, aims to boost domestic consumption.

Hang Seng Rallies Amid Tech Sector Breakout

In Asian markets, the Hang Seng Index rallied 2.00% on Monday morning. Market optimism over US-China relations and Beijing’s stimulus efforts fueled gains for Hong Kong and Mainland-listed stocks.

On January 17, President-elect Donald Trump commented on US-China relations:

“I just spoke to Chairman Xi Jinping of China. The call was a very good one for both China and the U.S.A. It is my expectation that we will solve many problems together, and starting immediately. We discussed balancing Trade, Fentanyl, TikTok, and many other subjects. President Xi and I will do everything possible to make the World more peaceful and safe!”

Tech stocks led the charge, with the Hang Seng Tech Index up 2.54%. Tech giant JD.com (9618) soared 5.93% on its national subsidy program, while Alibaba (9988) and Baidu (9888) gained 5.08% and 3.56%, respectively.

Real estate stocks also contributed, with the Hang Seng Mainland Properties Index gaining 1.55%. Meanwhile, Mainland China’s markets posted gains, with the CSI 300 and the Shanghai Composite rising 0.91% and 0.50%, respectively.

Nikkei Rises Despite Yen Strength

Japan’s Nikkei Index advanced by 1.29% on Monday morning. Easing concerns about a US-China trade war and expectations of a less hawkish Fed stance pushed the Index higher.

A stronger Japanese Yen, amid speculation about a Bank of Japan rate hike, failed to affect risk sentiment. The USD/JPY dropped by 0.26% to 155.848 in the morning session. A strengthening Yen could weaken overseas earnings, affecting valuations.

Export-focused stocks Sony Corp. (6758) and Nissan Corp. (7201) rose 1.46% and 1.41%, respectively. Uniqlo owner Fast Retailing Co. Ltd. (9983) advanced by 1.56% on Beijing’s focus on consumption.

ASX 200 Tracks the Dow Jones Higher

Meanwhile, Australia’s ASX 200 Index gained 0.25% on Monday morning. The Index tracked the Dow’s gains from Friday. Banking, mining, oil, and tech stocks contributed to the gains, while gold-related stocks stumbled. The S&P/ASX Technology Index advanced by 0.63%.

Rio Tinto Ltd. (RIO) gained 0.72%, tracking a 1.19% rise in iron ore spot prices on Friday. The Commonwealth Bank of Australia (CBA) rose 0.63%. Falling US Treasury yields increase the appeal of Aussie banks to yield-focused investors.

However, Northern Star Resources Ltd. (NST) tumbled 2.35%, following gold’s 0.45% drop on Friday.

Outlook: Risks and Opportunities

Global markets remain sensitive to geopolitical and economic uncertainties as Trump’s inauguration approaches: Tariff announcements will be crucial.

• US-China trade tensions and potential tariffs may weigh on global growth.
• Strong US economic data could challenge market expectations for Fed rate cuts.
• China’s stimulus measures will be key to sustaining domestic growth.

While central banks’ cautious policies may provide stability, investors should closely monitor trade policies, inflation trends, and monetary signals to navigate market volatility. Discover strategies to manage this week’s market volatility here.