The impact on Asian stocks from tariffs imposed on China by US President Donald Trump will be much more limited compared with a stronger dollar due to the uncertainty over the Federal Reserve’s rate cuts, according to Hang Seng Bank.
“The actual impact of Trump’s tariffs on the Chinese economy is limited,” Belle Liang, the head of investment advisory, said on Monday following the bank’s decision to maintain its prime rate. “We believe mid to long-term prospects for Asian equities remain positive due to China’s economic stimulus measures and tighter trade links with Asean [the Association of Southeast Asian Nations].”
A stronger US dollar would be unfavourable for capital flows in the short term, she added, especially for those markets with relatively high price-to-earnings ratios.
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“Investment risks this year centre on the impact of Trump’s policies rather than Fed rate decisions,” Liang said.
US President Donald Trump talks to reporters about tariffs against China, Canada and Mexico on Friday. Photo: Getty Images via AFP alt=US President Donald Trump talks to reporters about tariffs against China, Canada and Mexico on Friday. Photo: Getty Images via AFP>
On Monday, major banks in Hong Kong said they would keep their prime rates – those offered by banks to their best customers – unchanged. The move came after the Hong Kong Monetary Authority’s decision on January 30 to keep its key interest rate unchanged, in lockstep with the Fed.
HSBC said in a statement that it would keep its best lending rate unchanged at 5.25 per cent. Hong Kong’s biggest lender last cut its prime rate by 12.5 basis points on December 20, following the Fed’s decision to cut its rate by a quarter point.
HSBC’s subsidiary Hang Seng Bank and Bank of China (Hong Kong) also said they would keep their lending rate unchanged at 5.25 per cent. Standard Chartered Bank said it would keep its prime rate unchanged at 5.5 per cent.
The banks also said they would keep their savings rate unchanged at 0.25 per cent annually on deposits above HK$5,000 (US$640), while no interest would be paid on deposits below that threshold. Standard Chartered pays 0.25 per cent for deposits above HK$1.
Last Thursday, the Fed said it would maintain its target rate in the range of 4.25 to 4.5 per cent, citing several reasons including elevated inflation. Prices in the US rose by 2.9 per cent in December, the third month of increase and faster than the Fed’s target of 2 per cent. The US central bank also revised its forecast on interest rates, saying there may be only two rate cuts this year.
