[ET Net News Agency, 25 April 2025] The President of the Cleveland Federal Reserve, Beth
Hammack, ruled out the possibility of a rate cut by the Federal Reserve in May, but hinted
at the chance of a cut in June. Global stock markets generally performed well, with the
Hang Seng Index reversing its decline from yesterday, opening 170 points higher at 22,206,
up 297 points or 1.4%, with turnover close to HKD 116.4 billion. The Hang Seng China
Enterprises Index was at 8,160, up 104 points or 1.3%. The Hang Seng Tech Index was at
5,068, up 92 points or 1.9%.

"Yuen Che Hay: US rate cuts only provide short-term benefits for Hong Kong stocks"

The Hong Kong stock market opened above the 20-day moving average (21,889 points). Yuen
Che Hay, the Co-Director of Investment Strategy of Quam Asset Securities, told ET Net News
Agency that signs of easing in Sino-US relations, along with the Federal Reserve officials
adopting a dovish stance, have driven the Hang Seng Index up again today. However, the
outlook for Sino-US relations remains pessimistic, and the rebound in Hong Kong stocks is
likely to be limited. He noted that whether the Fed adopts a dovish stance now or actually
cuts rates in the future, it will only help with short-term capital costs and the stock
market. With the US imposing a 245% tariff, even negative interest rates would struggle to
resolve China's foreign trade difficulties.
Regarding Sino-US trade negotiations, there are conflicting statements from both sides.
US President Trump stated that discussions on resolving trade issues took place on
Thursday (24th), emphasising ongoing communication between both parties. Yuen Che Hay
believes that while there may be low-level meetings between officials, the likelihood of
reaching an agreement is very slim. According to the Chinese Ministry of Commerce, even
with recent market speculation that the US might reduce tariffs on China to 20-30% after
reaching an agreement, this would still be unacceptable to China. China's stance indicates
they will not accept tariffs, so there seems to be no possibility of an agreement at
present. Yuen Che Hay pointed out that China clearly demands equal tariffs from both
sides, meaning zero tariffs from the US towards China, which is nearly impossible for
Trump to accept.
As for the Hang Seng Index's performance, Yuen Che Hay mentioned that in the short term,
it could aim for the gap high of 22,849 points before the significant drop on 7 April.
However, stabilising above 23,000 points would be challenging. The 20-day moving average
has not yet provided support, with initial support seen at the 21,000 mark.

"The Sino-US trade war is severe, and the Politburo meeting is unlikely to stimulate the
stock market"

The Mainland China will hold a Central Politburo meeting, expected to discuss economic
issues and the outlook for the tariff war. Today, the Mainland China property sector has
already seen a surge. Yuen Che Hay stated that due to the impact of the trade war on
exports, some export businesses need to shift towards domestic sales. He believes the
Central Politburo meeting will still focus on the domestic demand sector to stimulate
consumer spending. He anticipates that the central government may introduce policies such
as consumer vouchers, trade-ins for home appliances and cars, and tourism-related
measures, but the policy content is unlikely to be innovative. Yuen Che Hay advises
investors to consider stocks in the catering and tea industries, which focus on domestic
sales, but to be cautious with home appliance stocks due to their export exposure. He
cautioned that while these policies may stimulate domestic demand stocks, they are
unlikely to fundamentally change the economic situation, so expectations for the actual
effects of the policies should be tempered.
Citi predicts that the meeting will propose around RMB 1.5 trillion in additional fiscal
stimulus, but Yuen Che Hay believes that no specific figures will be announced, and it is
unlikely to have a significant stimulating effect on the stock market.
Market forecasts suggest that the People's Bank of China may lower the reserve
requirement ratio around the time of the Politburo meeting, with a 20 basis point rate cut
potentially coming in May or June. Yuen Che Hay admitted that while there may be a rate
cut or reserve requirement reduction around the time of the Politburo meeting, it is
merely an attitude adjustment with limited actual impact, as the current issue is not the
cost of borrowing, but rather the lack of borrowing. This news may help heavily indebted
property firms, but it offers little assistance to real industries. The challenges
businesses will face include disrupted imports of raw materials and stagnant product
sales, with monetary policy unlikely to provide much help.