Hong Kong Stocks Break Six-Day Rally Amid Easing Policy Hopes; China’s Central Bank Trims Short-Term Rate in Response to Lower US Interest

Shares in Hong Kong break a six-day run, but stay close to a two-month peak due to expectations of policy relaxation. China's central bank has reduced a short-term policy rate, strengthening the case that a decrease in US interest rates provides Beijing with more flexibility for easing. The central bank in China has again reduced a short-term policy rate, reinforcing the notion that a dip in US interest rates gives Beijing additional leeway for mitigation measures.

The Hang Seng Index experienced a minor decline of 0.1 per cent, closing at 18,247.11, which wiped out an earlier increase of up to 0.9 per cent. The index, which had ended at its peak since July 12 on the previous Friday, broke its six-day winning streak of a 6.7 per cent surge. The Hang Seng Tech Index also fell 0.2 per cent, while the Shanghai Composite Index saw a 0.4 per cent rise.

Leading the downturn, the biotech company Wuxi AppTec saw a fall of 3.5 per cent to HK$41 while its sister company, Wuxi Biologics, dropped 2.4 per cent to HK$13.06. The technology platform, Meituan, also suffered a 2.3 per cent drop to HK$132.80. On the other hand, smartphone manufacturer Xiaomi saw a 4.4 per cent rise to HK$20.75, following the announcement of a new product line by CEO Lei Jun. China Resources Power also saw an increase, rising 3.5 per cent to HK$19.88. Additionally, Alibaba Group Holding experienced a small increase of 0.6 per cent to HK$87.70.

The People's Bank of China announced on Monday that it has reduced the 14-day reverse repurchase rate from 1.95% to 1.85%. In addition, it disclosed that it has funneled 74.5 billion yuan (equivalent to US$10.6 billion) into the financial system using this mechanism, according to a statement.

"The decrease in interest rates is beneficial for developing markets," stated Gary Dugan, Chief Executive Officer of The Global CIO Office. "We anticipate other major banks will do the same. Therefore, the most immediate investment opportunity for portfolio leverage due to these reduced rates will likely be in Asian markets, where investors can expect multiple rate decreases in the forthcoming months."