Hang Seng Tech Stocks Surge on Fed Rate Cut and China’s Stimulus Prospects

US Markets: Fed Rate Cut Boosts Tech Stocks

On Thursday, November 7, US equity markets experienced a mixed session. The Nasdaq Composite Index and the S&P 500 advanced by 1.51% and 0.74%, respectively, while the Dow closed flat.

Investors reacted to the Fed cutting interest rates, which boosted demand for capitally intensive stocks, including tech.

Fed Cuts Interest Rates by 25 Basis Points

On Thursday, the Fed took to the stage, cutting the Fed Funds Rate by 25 basis points to the target range of 4.50% – 4.75%. Lower borrowing costs could potentially enhance company earnings, especially for companies with higher capital requirements. The potential for improved earnings would boost demand for stocks.

The Fed rate cut followed Trump’s US presidential election victory that fueled a US equity market rally.

In the bond market, 10-year US Treasury yields slid to 4.328%, supporting demand for riskier assets.

Japan’s Household Spending Dampens BoJ Rate Hike Expectations

On Friday, November 8, household spending figures from Japan likely reduced bets on a December Bank of Japan rate hike. Household spending declined by 1.3% month-on-month in September, following a 2% increase in August.

Declining private consumption may dampen demand-driven inflation and affect Japan’s economy as it contributes around 60% to GDP. A soft demand outlook would affect the BoJ’s plans for monetary policy normalization. Importantly, a less hawkish BoJ rate path might increase demand for Nikkei Index-listed stocks.

The USD/JPY trended higher on Friday morning, also contributing to morning gains on the Nikkei Index.

China Stimulus Speculation Intensifies

On Thursday, Mainland China’s equity markets and the Hang Seng Index rallied on speculation about a possible stimulus package from Beijing.

The National People’s Congress Standing Committee might announce new policy measures at any moment. News of a significant stimulus package targeting consumer demand could drive another breakout session. Stimulus focusing on private consumption might also ease concerns about the impact of potential Trump tariffs on China’s economy.

Hao Hong, strategist/economist for AsiaMoney, commented:

“Chinese stocks surging again – //heard on the street // big stimulus worth 12 trillion coming: 6tn for local government bond swap + 4tn property bailout + 2tn consumption stimulus. If so, while the first ten trillion was previously discussed here, the 2tn for consumption stimulus is new and is what the market has been hoping for. It shows a change of ways to stimulate the economy. Market cheers.”

Hang Seng and Mainland China Equities Advance on Fed and Beijing Sentiment

In Asian markets, the Hang Seng Index gained 0.83% on Friday morning. Investors reacted to the overnight Fed rate cut and rising stimulus expectations from Beijing. Tech stocks tracked the Nasdaq, contributing to the morning gains.

The Hang Seng Tech Index rallied 2.14%, with tech giants Alibaba (9988) and Baidu (9888) advancing by 0.68% and 0.95%, respectively.

Mainland China’s equity markets also rose on stimulus bets, with the CSI 300 and the Shanghai Composite rising by 0.58% and 0.81%, respectively.

Nikkei Advances as Household Spending Disappoints

In Japan, the Nikkei Index advanced by 0.47% on Friday morning. Weaker-than-expected household spending numbers from Japan and the Fed rate cut boosted demand for Nikkei Index-listed stocks.

Softbank Group (9984) and Tokyo Electron (8035) saw gains of 2.54% and 0.52%, respectively. However, Nissan Motor Corp. (7201) tumbled 6.15% as investors reacted to news of the company lowering its profit outlook, ditching its midterm plan, and cutting jobs. CEO Makoto Uchida reportedly described the situation as extremely tough.

ASX 200 Tracks the US Markets Higher

The ASX 200 Index rallied 0.95% on Friday morning. Banking, gold, mining, and tech stocks led the morning gains. The S&P/ASX All Technology Index advanced by 1.04%, tracing the Nasdaq’s overnight gains.

Mining giants Rio Tinto Ltd. (RIO) and BHP Group Ltd. (BHP) rallied 1.80% and 1.42%, respectively. Iron ore spot prices ended the Thursday session higher on China stimulus bets, driving demand for mining stocks.

Looking Ahead

Investors should continue to monitor developments from the NPCSC meeting. Fresh stimulus measures from Beijing could influence demand for riskier assets. Stay informed with our latest news and analysis to manage your risks effectively.