What would another Fed rate cut in November mean for Hong Kong’s stock market and IPOs?

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Lower rates will drive investors away from US dollar assets towards Hong Kong and Chinese markets, with Beijing’s recent stimulus acting as a catalyst

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The fortunes of Hong Kong’s stock market are back on the rise. Photo: Eugene Lee

Enoch Yiu

Published: 8:30am, 3 Oct 2024

Investors are looking forward to another possible Federal Reserve rate cut early next month as it will divert fund flows from US dollar assets to stock markets in Hong Kong and China, according to analysts.

The lower rates, coupled with China’s stimulus package last week, have fuelled market sentiment. These are likely to bring more new listings this quarter and propel Hong Kong back into the top three initial public offering (IPO) markets worldwide for 2024, from fifth in September.

“A lower interest-rate environment will lower overall capital costs for companies and stimulate growth, which will benefit stock markets, as investors will look to increase their equity asset allocation,” said John Lee Chen-kwok, vice-chairman and co-head of Asia country coverage at UBS.

“China’s recent stimulus measures have also helped boost market performance and pushed turnover to record highs. The positive market environment and trading liquidity will help to boost IPOs in Hong Kong in the coming months.”

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The market has fully priced in a quarter-point cut on November 7, according to odds compiled by CME Group based on futures contracts. The odds of a 50-basis-point cut weakened to about 36 per cent from 57 per cent a week ago.