【True Vision Hong Kong Stock Market Experts】Hong Kong stocks fluctuated weakly, mainland's market stabilization measures expected to help the market recover.
Hong Kong Stock Market Trends and Analysis
The U.S. stock market was closed on Thursday for a holiday, while the U.S. dollar showed positive momentum. The yield on the 10-year U.S. Treasury note fell to 4.64%, with gold and oil prices edging higher. The Hang Seng Index futures recorded a modest gain overnight, suggesting a slight higher opening for the market in early trading. Mainland stocks declined yesterday, with the Shanghai Composite Index opening lower and closing down 0.6%. Trading volume in both the Shanghai and Shenzhen markets also shrank. Hong Kong stocks continued to fluctuate weakly, with the latest mainland inflation data pointing downward, indicating persistent deflationary pressures. The market opened lower and fluctuated downward, with overall trading remaining subdued. Investors remained cautious, focusing on the direction of external interest rates. Additionally, with President Trump about to take office, concerns over geopolitical developments weighed on the market. The index is expected to test support at 19,000 points, with resistance at the 20,000 level.
Industry News
The People's Bank of China (PBOC) recently announced that, to better leverage the stabilizing role of securities and fund institutions, it would work with the China Securities Regulatory Commission (CSRC) to advance the implementation of swap facilities for securities, funds, and insurance companies. Based on the needs of participating institutions, the PBOC initiated a second round of swap facility operations and completed the bidding process. The operation involved 55 billion yuan, using a fee-based bidding mechanism. Twenty institutions participated, with the highest bid at 30 basis points and the lowest at 10 basis points. The winning bid was set at 10 basis points. China Securities Depository and Clearing Corporation (ChinaClear) announced that, to better support the smooth operation of swap facilities for securities, funds, and insurance companies, it would halve the fees for securities pledge registrations related to SFISF. Among these, the fees for Stock Connect securities pledge registrations will be charged based on the number of pledged shares, effective from the date of the notice. Swap facilities are a monetary policy tool introduced by the mainland to support the capital markets, allowing eligible securities, funds, and insurance companies to exchange bonds, stock ETFs, and CSI 300 constituent stocks for high-liquidity assets such as government bonds and central bank bills. The initial scale of the swap facility is 500 billion yuan. In late October last year, the first operation of the swap facility for securities, funds, and insurance companies was conducted, involving 50 billion yuan and 20 participating institutions. Additionally, reports indicate that financial regulators recently reduced the minimum self-funded capital requirement for stock repurchase loans to 10%, meaning financial institutions can support up to 90% of the actual repurchase amount. The new rules lower the participation threshold and ease funding pressure on borrowers. Furthermore, financial regulators now allow listed companies and major shareholders to pledge other stocks they hold, further reducing the difficulty and cost of obtaining loans. The policy also explicitly encourages the issuance of stock repurchase loans on a credit basis. The mainland's introduction of more measures to stabilize the capital market is expected to help revive the stock market and improve valuation levels.
(The author is a licensed person of the SFC and does not hold the aforementioned stocks.)
Guo Jiayao CFA, Business Development Director, Harbor Family Office
Date: Friday, January 10, 2025
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