[ET Net News Agency, 18 September 2025] The Federal Reserve cut rates by 0.25 percentage
points as expected. Hong Kong stocks consolidated at midday. The HSI was at 26,860, down
47 points or 0.2%, with main board turnover over HKD 204.7 billion. The Hang Seng China
Enterprises Index was at 9,586, down 10 points or 0.1%. The Hang Seng Tech Index was at
6,400, up 65 points or 1%.

"Yuen Che Hay: Local banks likely to trim prime rates in tandem but unlikely to be
aggressive. Primary housing market expected to hold at current levels"

The Fed delivered a 0.25 point cut without surprises, in line with market expectations,
but Chair Jerome Powell struck a hawkish tone, saying the move could be seen partly as
risk management. Overnight, US stocks rose then pulled back on his comments. Hong Kong
stocks followed with early profit taking, but dip buyers emerged near 26,800 and the index
briefly reclaimed 27,000 the first touch in more than four years before easing to a small
midday loss.
Following the 0.25 cut, the Hong Kong Monetary Authority lowered the discount window
base rate by 0.25 this morning. Yuen Che Hay, the Co-Director of Investment Strategy of
Quam Asset Securities , told ET Net News Agency he expects local banks to lower their
prime rates during the day. While banks' businesses may not favour further prime cuts, a
trim still supports commercial activity given local needs. He sees little chance of banks
cutting beyond the Fed given the relatively subdued property market. Even hefty prime cuts
would not meaningfully spur home buying. Under current rate cut expectations, primary
sales should hold at existing heat levels but are unlikely to improve significantly. The
same goes for developers' shares.

"Fed unlikely to cut continuously. HSI hard to break out big but downside seems limited"

On the Fed path, Yuen said Powell's remarks imply the Fed will not cut at every meeting.
Markets had been very optimistic before today, so with trimming expectations toned down,
previously buoyant gold and bond markets pulled back.
Ahead of the decision, sentiment in Hong Kong was strong and the HSI had already topped
26,900. Yuen believes the market has largely priced in the positives from cuts. Rate cut
expectations alone will not propel the HSI to challenge 28,000 or 29,000. Additional
drivers are needed. Still, he sees limited downside. The market is digesting the less
dovish than expected outcome, with firmer support around 26,500. As long as sentiment
stays constructive, new highs are more likely than fresh lows.

"Rich valuations and foreign inflows do not guarantee one way buying. Trade themes with
small and frequent positions"

Tech stocks remained notably strong. Even with an uncertain easing path, chip and AI
names drew robust bids this morning, with SMIC (00981) and Baidu (09888) leading blue
chips. On the heavy turnover surge yesterday, market chatter from Goldman's trading desk
suggested that while yesterday's southbound net inflows exceeded HKD 9.4 billion,
southbound activity's share of total turnover fell below 25%. At the same time, leaders
such as Baidu still saw large inflows, indicating much of the buying likely came from
overseas investors.
Yuen is cautious about the foreign inflow narrative. Although inflows are generally seen
as supportive, the market has already rallied substantially. Even if overseas funds chase
higher, they may not stay for long. He advocates a short term approach rather than placing
large bets now in hopes of a big win. Focus on stocks rather than the index. Follow hot
themes and take smaller and frequent profits. For example, AI and robotics have been in
favour, with Baidu and Alibaba (09988) trending higher as ongoing headlines draw a higher
entry premium. However, such moves are news driven. After the news cycle fades, pullbacks
are possible. Given the strong underlying market, he is not outright bearish, but suggests
trading short term in line with one's risk tolerance.
Given the market's bias to rise rather than fall, Yuen finds it hard to time a cool off.
If participating in theme trades, consider taking profits when turnover in the stock or
sector starts to quieten, then watch for the next likely theme. He expects "Golden Week"
related themes to attract more attention, and notes rising flows into China property names
lately, which merit short term monitoring.