China, HK stocks edge higher, as Fed rate-cut optimism eclipses domestic economic weakness

SHANGHAI: Mainland China and Hong Kong stocks edged higher on Monday, driven by gains in non-ferrous metal and AI shares, as investor optimism over a potential Federal Reserve rate reduction later this month outweighed concerns over domestic economic weakness.

• At the midday break, the Shanghai Composite index rose 0.42%, while the blue-chip CSI300 index advanced 0.75%.
• The smaller Shenzhen index gained 0.85%, the start-up board ChiNext Composite index was higher by 0.9% and Shanghai’s tech-focused STAR50 index climbed 0.77%.
• Non-ferrous metal and artificial intelligence-related shares led gains, with sub-indexes tracking the sectors rising 2.63% and 2.58%, respectively.**
• In Hong Kong, the benchmark Hang Seng Index rose 0.81%, while the city’s tech index advanced 0.99% in morning deals.
• Investors will focus on comments from Fed Chair Jerome Powell later in the session for more clues on the US monetary policy outlook.
• Dovish comments from policymakers have convinced investors that a rate cut is on the cards. Traders are pricing in an 87% chance of a cut later in the month.
• On the domestic front, China’s factory activity contracted last month, according to both official and private surveys. And investors will shift their attention to the upcoming Central Economic Work Conference (CEWC) later this month for possible hints on the policy agenda for next year.**
• Bucking the trend, Hong Kong-listed shares with cryptocurrency-related businesses tumbled after China’s central bank vowed to crack down on virtual currencies and flagged concerns about stablecoins.
• So far this year, the Shanghai stock index is up 16.5%? and the CSI300 has risen 15.9%, while the HSI jumped about 30%.
• “Capital inflows have returned based on the net FX settlement data, as foreign investors have increased their holdings of domestic Chinese equities consistently since April 2025, and this is expected to continue in 2026,” ANZ analysts said.