Hang Seng Index: Gains Amid China's MLF Decision and U.S. Tariff Concerns

In Asian markets, the Hang Seng Index advanced by 0.49% on Monday morning, the PBoC rate decision and concerns about US tariffs could test buyer appetite for riskier assets.

Hang Seng Index and Mainland China Markets Diverge

In Asian markets, the Hang Seng Index rose by 0.49% on Monday morning, buoyed by gains in the automotive, real estate, and technology sectors. However, the People's Bank of China's (PBoC) rate decision and concerns over U.S. tariffs may challenge investor appetite for riskier assets.

Among the tech giants, Baidu (9888) increased by 1.57%, while Alibaba (9988) gained 0.93%. BYD Electronic International (0285) saw a rally of 2.19%, and Li Auto (2015) rose by 2.16%.

Conversely, Mainland China's equity markets faced downward pressure following the PBoC's rate decision, with the CSI 300 and Shanghai Composite indices falling by 0.23% and 0.20%, respectively.

What’s the impact of US-China trade war?

As a new presidential administration and Congress take office in January, China is set to remain a key focus for policymakers. In light of the ongoing competitive tensions between the two superpowers, the possibilities for U.S.-China cooperation on critical global issues—such as climate change, nuclear non-proliferation, and food security—seem increasingly unlikely.

The U.S. and Chinese economies have experienced slower growth rates due to tariffs and trade restrictions. Businesses face higher costs, which can dampen investment and consumer spending. Companies have had to reassess and often restructure their supply chains to mitigate risks, leading to disruptions and increased costs.

The trade war has affected the trade balances of both countries. While the U.S. aimed to reduce its trade deficit with China, tariffs have led to retaliatory measures that can complicate trade dynamics.

U.S. farmers have been particularly hard hit, as China imposed tariffs on agricultural products. This has led to reduced exports and financial strain on farmers. The technology sector has faced significant disruptions, with restrictions on Chinese tech firms leading to increased costs and uncertainty for companies relying on Chinese manufacturing and markets.

The trade war has contributed to increased volatility in global markets, affecting investor confidence and economic forecasting. Countries that are part of global supply chains, especially in Asia and beyond, have also felt the repercussions, leading to shifts in trade patterns and economic strategies.

PBoC Maintains 1-Year MLF Rate at 2%

On November 25, the People’s Bank of China (PBoC) decided to keep the 1-year Medium Term Lending Facility (MLF) rate steady at 2%. This decision has influenced buyer demand for stocks listed on Mainland China exchanges.

Heightened concerns over U.S. tariffs on Chinese goods have made the market more sensitive to actions from China's central bank and policy developments from Beijing. Investors are now looking for new stimulus measures aimed at boosting domestic consumption to mitigate the potential adverse effects of U.S. tariffs on the Chinese economy.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.