Hang Seng Index: Tech Surge Drives 1.66% Rally on Trump’s Tariff Optimism

US Markets Gain on Trump’s Rate Cut Call

US markets posted gains on Thursday, January 23, driven by US President Trump’s calls for lower interest rates. The Dow and the S&P 500 gained 0.92% and 0.53%, respectively, while the Nasdaq Composite Index rose 0.22%.

The US President also stated he would ask OPEC nations to lower oil prices, a key inflation driver. Prospects of lower rates boosted demand for riskier assets.

Thursday’s gains set the tone for Friday’s Asian market session, though the Bank of Japan monetary policy decision was also a focal point.

Bank of Japan Delivers Hawkish Rate Hike

On Friday, January 24, the Bank of Japan raised interest rates by 25 basis points to 0.50%.

The USD/JPY pair fell 0.30% to 155.422 on Thursday morning as investors reacted to the rate hike and quarterly outlook report. Regarding future rate hikes, the BoJ stated,

“If the outlook presented in the January Outlook Report will be realized, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation.”

The highly anticipated rate hike shifts focus to the Bank of Japan’s press conference later today. Japan’s latest inflation and Services PMI data could enable BoJ Governor Kazuo Ueda to reinforce the more hawkish stance.

A particularly hawkish BoJ rate outlook could fuel a Yen rally, potentially triggering a Yen carry trade unwind and impacting equity flows.

Hang Seng Index Rallies on Trump’s Tariff Comments

The Hang Seng Index rose 1.66% on Friday morning as investors reacted to Trump’s latest comments about tariffs on Chinese goods. Speaking at the World Economic Forum in Davos, Trump reportedly said,

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

Tech stocks led the way, with the Hang Seng Tech Index rallying 2.40%. Tech giants Baidu (9888) and Tencent (0700) were up 2.32% and 2.11%, respectively.

Mainland China’s equity markets also responded favorably to Trump’s comments. The CSI 300 and the Shanghai Composite gained 0.99% and 0.77%, respectively.

Nikkei Index Advances Despite Yen Pressure

Japan’s Nikkei Index trended higher on Friday morning, advancing by 0.59%. Easing fears of a US-China trade war and hopes for Fed rate cuts countered the BoJ’s policy stance, driving demand for Japanese stocks.

Major gainers included KDDI Corp. (9433) and Fast Retailing Co. Ltd., which advanced by 0.93% and 0.59%, respectively. However, the stronger Japanese Yen pressured export-focused stocks. Sony Corp. (6758) and Nissan Motor Corp. (7201) dropped by 1.89% and 0.72%, respectively. A stronger Yen may weaken overseas earnings, potentially impacting valuations.

ASX 200 Supported by Mining and Banking Stocks

Australia’s ASX 200 Index gained 0.36% on Friday morning. Banking, mining, and tech-related stocks sent the Index higher.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) advanced by 0.15% and 0.22%, respectively. Hopes of China avoiding US tariffs drove iron ore spot prices higher on Friday. However, overnight iron ore spot price losses limited the stocks’ gains.

Hopes of Fed rate cuts pressured 10-year US Treasury yields on Friday, boosting demand for banking stocks. The Commonwealth Bank of Australia and National Australia Bank rose 0.60% and 0.64%, respectively. Bank stocks benefited from falling US Treasury yields, which increased demand for high-yielding Australian banks.

Meanwhile, oil-related stocks posted losses, with Woodside Energy tumbling 2% after Trump called for lower oil prices.

Outlook: Navigating Risks and Opportunities

Geopolitical tensions and economic uncertainty remain key themes. US-China trade talks, central bank policies, and AI investments could influence market sentiment.

While tech and AI sectors may outperform, trade-sensitive industries like mining face continued volatility. Investors should closely monitor trade negotiations, inflation trends, and monetary policy signals to navigate evolving market dynamics.

While China’s stimulus measures may stabilize regional markets, investors should remain cautious, monitoring trade developments, inflation, and monetary signals. Discover strategies to navigate this week’s market trends here.