Source: Gelonghui

On Tuesday, Hong Kong stocks fell back into sharp correction again. As of press release, the Hang Seng Technology Index once fell more than 3% intraday, but now it has narrowed to 2.77%, and the Hang Seng Index is down 1.97%.

On the market, large technology stocks turned green across the board, and large financial stocks fell collectively. Domestic housing stocks, property management stocks, automobiles, semiconductors, gold, coal, games, etc. all declined sharply; agricultural products and infrastructure stocks bucked the trend.

Since this year, the overall decline in Hong Kong stocks has continued, and hit a low point in the current round last week. After rising for 3 days due to favorable policies, they fell back into a downward trend this week.

Currently, the Hengke Index fell by more than 17% during the year, the Hang Seng Index fell 7.5% during the year, and the State-owned Enterprises Index fell by more than 8% during the year.

When will the Federal Reserve cut interest rates?

The previous wave of unexpected rebound was due to the successive voices of the Central Bank, the State Assets Administration Commission, the Securities Regulatory Commission, the Hong Kong Monetary Authority, and the Hong Kong Securities Regulatory Commission last week, which boosted the market.

Furthermore, the State Assets Administration Commission proposed “incorporating market value management into central enterprise performance assessments” to enhance the certainty that high-dividend central state-owned enterprises will pay dividends. Guojun Hong Kong pointed out that judging from historical performance, the high dividend style of Hong Kong stocks (with low risk characteristics such as undervaluation and stable cash flow) can outperform the market in weak markets and volatile markets.

However, at present, there are many uncertainties in the global economy, and Hong Kong stocks are still in a relatively sluggish market mood.

In order to fight inflation, the Federal Reserve has raised interest rates 11 times in a row since March 2022. The frequency and magnitude of interest rate hikes far exceeding market expectations has also caused a negative increase in overseas liquidity, thus inducing a sharp withdrawal of foreign capital from Hong Kong stocks.

Now, when the Federal Reserve will cut interest rates is driving market nerves.

The Federal Reserve will hold an FOMC meeting and announce interest rate decisions this week. The timing of interest rate cuts became the top issue during the two-day meeting.

Most economists expect the first rate cut to occur in May or June, but the Federal Reserve may also cut interest rates at its March meeting.

But it is almost certain that the Federal Reserve will announce that interest rates will remain unchanged this week. According to the CME “Federal Reserve Watch” tool, the probability of maintaining interest rates this week is 97.9%, while the probability of cutting interest rates in March is 46.6%.

Recently, Nick Timiraos, known as the “Federal Reserve's microphone,” said that the Federal Reserve is concerned that real interest rates are too high and will abandon the austerity trend this week, but it may take a symbolic and important step.

In addition, another factor that cannot be ignored is that at a time when the Federal Reserve is considering cutting interest rates, at a time when the US presidential campaign is intensifying, Biden is seeking re-election, and the economy is a polarized issue.

And interest rate cuts are likely to be attacked by former President Trump. Trump may think that any move by the Federal Reserve to cut interest rates this year will help Biden in the November election campaign.

Is the “living water” of Hong Kong stocks expected to rise?

Today (January 30), Hong Kong's Financial Secretary, Mr Chan Mao-po, said that Hong Kong's capital market will inevitably fluctuate last year due to a combination of adverse factors such as geopolitics and a high interest rate environment, which also reflects investors' concerns about the mainland economy and capital market.

He pointed out that the government continues to monitor the market across markets and around the clock, and there are no abnormalities. The financial market continues to operate in an orderly and efficient manner, the financial system is stable, and the linked exchange rate system works well.

Chen Maobo stressed that capital flows will not be one-sided; the most important thing is to make good use of Hong Kong's unique advantages. Currently, discussions are under way with mainland regulators to speed up the listing of enterprises in Hong Kong.

He pointed out that connectivity with mainland financial markets will continue to be expanded and deepened, and Hong Kong's position as an offshore RMB business hub will be strengthened; connectivity will be accelerated with mainland regulators, and the RMB trading desk will be added to Southbound Connect.

In addition, companies from the Middle East and Southeast Asia are encouraged to go public in Hong Kong, and every effort will be made to develop the bond market and supplement financing functions.

In terms of the recent allocation of Hong Kong stocks, Zheshang International believes that it may continue to emphasize maintaining a distributed and balanced allocation of industry sectors. In a weak market environment, focus on sectors with stable performance, stock prices, and dividends. At the same time, it is recommended to maintain some of the layout of industries with favorable cycles, favorable policies, and prosperity.

Regarding the future market of Hong Kong stocks, CITIC Securities recently pointed out that since the beginning of the year, the market has paid more and more attention to high dividend strategies, especially in the context of state-owned enterprise reform policy expectations. Looking forward to the future, despite the recent downgrade that has exceeded expectations and the introduction of a series of real estate policies is expected to lead to a recovery in market sentiment in the short term, combined with the current sluggish market sentiment, the continued rise in the subsequent market is still awaiting continued implementation of policies and fundamental data.

Combined with the re-adjustment of the peripheral Federal Reserve's monetary easing expectations and the risk that interest rates on US bonds will rise above expectations, it may still suppress the valuation of the Hong Kong stock market in the first half of the year. The agency is still optimistic about the allocation value of high-dividend assets in the “volatile market” of Hong Kong stocks.

Editor/Jeffrey