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Mint
8 hours ago
- Business
- Mint
When pegs fly: Trump-induced turbulence hits Hong Kong dollar, interest rates
By Rae Wee and Jiaxing Li SINGORE/HONG KONG, - U.S. President Donald Trump's erratic policies are rattling a currency peg that has withstood the test of time and is seen as an anchor for China and Asia. The Hong Kong dollar has whipsawed from one end of its narrow trading band to the other versus the greenback in just a month. While the latest volatility is not seen as a threat to the four-decade-old peg, the it has had a dramatic impact on interest rates, providing a challenging environment for businesses and investors in the financial hub. The stress on one of the world's best-known currency pegs underscores how volatility in the U.S. dollar under Trump is disrupting even the most stable corners of the market. Interest rates in Hong Kong have tended to move in lockstep with the United States, keeping the Hong Kong dollar - which trades between 7.75 and 7.85 per U.S. dollar - relatively stable. But they have decoupled over the past month as global investors cooled on U.S. assets and fretted about Washington's growing debt pile, while massive capital entered Hong Kong as foreigners flocked to blockbuster share offerings. Chinese investors have also ploughed record amounts of money into Hong Kong-listed stocks. "The pace and speed of inflow was quite surprising," said Raymond Yeung, ANZ's chief economist for Greater China. The volatility forced the Hong Kong Monetary Authority , the city's de-facto central bank, to intervene in the foreign exchange market four times in May as the Hong Kong dollar bumped up against the strong end of its trading band. That caused borrowing costs in Hong Kong to plunge to record lows, tempting speculators to short-sell the currency and drive it swiftly to 7.85, the weak end of the band. As Hong Kong rates fell, the gap between U.S. three-month rates and the benchmark in Hong Kong hit a record high last week, based on LSEG data stretching back to 2020. Spreads across other tenors similarly widened. Analysts say it is normal to see an occasional deviation in rates between the Hong Kong dollar and U.S. dollar, but the abrupt moves seen in recent weeks are worrisome for businesses and investors - especially given disruptions to global trade and other uncertainty. "If the gap closes abruptly, then firms and households and the financial system in Hong Kong might suffer from a large interest rate shock, which is not good for financial stability," ANZ's Yeung said. Hong Kong officials have sought to reassure markets that the peg is here to stay, and that despite the increased volatility, there are some benefits to the current low level of rates. The city's leader John Lee told SCMP in an interview published on Monday that the city will maintain its currency's peg to the dollar. HKMA chief Eddie Yue noted the impact of lower interest rates on individuals and corporates would vary, depending on their relative positions in bank deposits and borrowings. "However, looking at it through a macroeconomic lens, lower interest rates should be beneficial to the current economic environment of Hong Kong," he said in a blog post. Lower mortgage rates seem to have helped the economy's flagging property market, with home prices edging up in April to end four months of decline. The government too has used the opportunity to access cheaper borrowing for longer. It issued 30-year bonds, its longest tenor debt, for the first time last month. "It's a good time for Hong Kong to lock in the low funding," said Lei Zhu, head of Asian fixed income at Fidelity International. This article was generated from an automated news agency feed without modifications to text.
Yahoo
03-04-2025
- Business
- Yahoo
China stocks, yuan tumble after bigger-than-expected Trump tariffs
By Jiaxing Li and Rae Wee HONG KONG (Reuters) - China's yuan dropped to its lowest level in seven weeks and stock markets slumped on Thursday after U.S. President Donald Trump unveiled a sweeping set of reciprocal tariffs that were particularly heavy on China and its main trading partners. While investors had been bracing for these tariffs over the past week, Washington's latest punitive measures turned out to be more aggressive than expected. Chinese imports will be hit with tariffs of 34%, on top of the 20% Trump previously imposed, bringing the total new levy to 54%. Countries in China's supply chain were hardest hit, with Vietnam, Cambodia and Laos getting slapped with tariffs between 46% and 49% respectively. China's blue-chip CSI 300 Index fell 0.6% to a two-month low, while Hong Kong's Hang Seng Index fell 1.5%. "The tariff hike was larger than most market participants were expecting, so the initial market reaction is likely going to be a continuation of risk-off sentiment," said Lynn Song, chief economist for Greater China at ING. While immediate yuan depreciation pressure is likely, Song did not foresee an intentional devaluation as that would lead to more tariffs and undermine currency stability benefits. YUAN SUPPORT Analysts said they are scrutinising China's intent to defend the yuan, to indicate how keen it is to both contain contagion in emerging markets and negotiate with Trump. China's onshore yuan ended the domestic session at 7.3043 per dollar, the weakest close since February 12. The offshore yuan hit a fresh one-month low overnight. China's major state-owned banks were seen buying yuan, and the People's Bank of China (PBOC) set the midpoint rate, around which it allows the yuan to trade, above market estimates, in a sign it aims to contain depreciation. The currency has already given up most of its year-to-date gains over the past month, despite efforts by the PBOC to keep it steady through changes to its daily benchmarks. Trump also signed an order to close a trade loophole used to ship low-value packages - valued at $800 or less - duty-free from China, known as "de minimis". The order covers goods from China and Hong Kong, and will take effect on May 2, according to the White House. Expectations that monetary easing will follow drove down Chinese bond yields on Thursday. Analysts said Trump and China might now be closer to starting trade negotiations, but foreign investors will for now stay away from a market they have poured billions into, chasing a rally spurred by Chinese AI startup DeepSeek. "China's recent tech re-rating is mostly insulated from tariffs," said Eugene Hsiao, head of China equity strategy at Macquarie Capital, adding that concerns centre mostly around the global risk-off sentiment which could limit further inflows. The trade war could also complicate Beijing's plan to spur economic growth, targeted at roughly 5% in 2025.
Zawya
06-03-2025
- Business
- Zawya
Hong Kong, China stocks end higher on tech-fuelled rally
Hong Kong shares rallied to a fresh three-year high on Thursday, led by tech stocks, as investors continued to pile into artificial intelligence shares and welcomed new policy support. Hong Kong's benchmark Hang Seng Index climbed 3.3% to 24,369.71, the highest since February 2022. The Hang Seng Tech Index rallied 5.4% after briefly touching its firmest since late 2021. Market heavyweight Alibaba surged 8.4% to its strongest since late 2021, after the release of a new AI model the company said was on par with global hit DeepSeek's R1. Gains extended in the late afternoon session after a joint press conference hosted by China's top officials from the central bank, market regulators and others who pledged more support for the economy and markets. The onshore market also climbed on Thursday, with the Shanghai Composite index up 1.2% and the blue-chip CSI300 index gaining 1.4%. Leading gains onshore, the chip sector subindex surged 4% and the consumer staples sector climbed 1.9%. Despite the moderate fiscal package announced at the National People's Congress, China's annual parliamentary meeting, the message of focusing on tech innovation and consumption was especially encouraging and should help to sustain the market's momentum, Morgan Stanley strategist Laura Wang said in a note on Thursday. "We remain positive on offshore equities and expect the latest tariff hike to disrupt but not derail the market's momentum." Goldman Sachs raised its target price for emerging market stocks on Thursday, projecting that the AI-powered rally in Chinese equities could boost other markets as well. (Reporting by Jiaxing Li in Hong Kong; Editing by Janane Venkatraman and Jacqueline Wong)
Zawya
03-03-2025
- Business
- Zawya
China stocks dip on tariff risks, parliamentary meetings eyed
Chinese stocks edged down on Monday in volatile trading as China and the U.S. prepared to slap more punitive trade tariffs on each other, while investors awaited the upcoming annual parliamentary sessions to gauge Beijing's policy path. Onshore stocks gave up gains in the morning session to close lower, with the Shanghai Composite Index declining 0.1% and the blue-chip CSI300 Index closing flat. Both indexes lost around 2% each on Friday. Hong Kong's benchmark Hang Seng Index added 0.3% after swinging between gains and losses to recover from Friday's biggest decline in four months. The Hang Seng Tech Index lost 0.6%. Renewed concerns over escalating trade tensions kept investors on edge after President Donald Trump last week announced an additional 10% tariff on all Chinese imports starting March 4, on top of the 10% tariff imposed since February 4. In response to these new U.S. import tariffs set to take effect on Tuesday, China is preparing countermeasures, China's state-backed Global Times reported, with American agricultural exports likely to be targeted. Meanwhile, investors were also watching potential support measures to boost domestic demand at China's annual National People's Congress meeting this week. Chinese investors tend to have low expectations of the parliamentary meetings, with some expressing concerns about the risk of insufficient policy stimulus, Goldman Sachs said in a note, citing recent meetings with clients. Beijing was expected to maintain its economic growth target at roughly 5% and announce a budget deficit of 4% of GDP. "The US is likely to follow through on its threat of an additional 10% tariff, and we think the March NPC could disappoint offshore market participants in terms of stimulus," analysts at Barclays said in a note. Supporting sentiment, both the official data and a private-sector survey showed China's manufacturing activity expanded at the fastest pace in three months in February as new orders and higher purchase volumes led to a solid rise in production, helping lift some concerns about the country's economic strength. (Reporting by Jiaxing Li in Hong Kong; Editing by Jacqueline Wong)
Yahoo
28-02-2025
- Business
- Yahoo
Hedge funds bet on turnaround in unloved China property sector
By Summer Zhen and Jiaxing Li HONG KONG (Reuters) - Some large hedge funds and investors are accumulating long-shunned China property stocks at low prices, anticipating lucrative returns when the sector recovers from its prolonged crisis. Investors said recent positive signs, from improving home prices in top cities to industry leader China Vanke's recapitalization plan, suggest this year will be the turning point for the real estate market. To be sure, they are selective and have set their sights on leading state-backed homebuilders and China's largest online property brokerage. "We have added some large state-owned developers recently, based on the logic of sector turnaround and winners take all," said Wang Qing, chairman at Shanghai Chongyang Investment Management, which runs $5 billion. "Land sales are recovering in first-tier cities, and we noticed that only these few real estate developers are still actively buying land," he said, adding that meant these builders were taking a larger market share. Chinese property has been a top short-selling target through the debt-ridden sector's downturn for more than three years and as a raft of privately-owned property giants, including Evergrande and Sunac China, went bankrupt. The shift in sentiment indicates investors are rebuilding confidence in the sector after the industry consolidation and massive measures introduced by China since September to stabilize the slumping housing market. Hong Kong-based Golden Nest Capital is also dipping into shares of some state-owned developers. "You could say that the sales volume of new homes has declined by half, but the number of developers has decreased even more," said Stanley Tao, CIO at Golden Nest Capital Management. As the sector stabilizes, the rebound in these overlooked stocks will be significant, Tao said. Hong Kong-listed mainland property stocks surged more than 15% this month, making it one of the top performing sectors just behind tech stocks. FUNDS BUY KE HOLDINGS KE Holdings, China's Zillow-like real estate platform, has become a darling among Asia's top hedge funds. Hong Kong's $9 billion Aspex Management built new positions in U.S.-listed KE Holdings by adding 6.51 million shares in the fourth quarter of 2024 with a market value of about $120 million as of the end of 2024, according to its filing with the U.S. Securities and Exchange Commission. WT Asset Management, which manages $4 billion, boosted its stake in KE Holdings by 2.2 million shares worth more than $40 million in the fourth quarter as well. KE Holdings is benefiting from robust sales of secondary homes in big cities after the Lunar New Year and tech advancements, Griffin Chan, a property analyst at Citi Research said in a note this week. Cash-strapped top homebuilder Vanke's bailout by the government in early February further boosted sentiment as many view it as a landmark event that greatly reduces the risk of defaults by another major developer. Shares of KE Holdings and property developers rebounded sharply in February, although many have lost more than 80% over the past three years. "I do think we are close to a turning point on property stocks," said Jon Withaar, head of Asia special situations at Pictet Asset Management. Jon said his entry into property stocks depends on whether there will be more government-backed restructuring and on property price trends. Obviously, the recovery is at the initial stage, and many smaller cities are still struggling with unsold homes. Investors remain divided on the outlook for real estate. "It's more about trading opportunities," said Wang Qi, CIO at UOB Kay Hian Wealth Management. "It's like a flash in the pan, but even a flash in the pan might present three to six months of opportunity. These stocks are very cheap and could rise 50% - that's normal," he said. Sign in to access your portfolio
