Hong Kong's economic landscape witnessed dynamic shifts this past month, marked by a notable rise in inflation, a surge in the Hang Seng Tech index, and a governmental focus on cost-saving strategies. The city's weighted consumer price index increased by 2.5% year-on-year in January, driven primarily by higher costs in food and beverages, housing, alcohol, and tobacco. However, a decrease in electricity prices provided some relief, partially offsetting the inflationary pressures.
In the financial markets, Hong Kong's Hang Seng Tech index surged 5.25% during its last hour of trade. Major tech companies, including JD.com, Xpeng, Alibaba, and Meituan, experienced significant gains. Meituan shares rose sharply by 10.47%. This upward momentum in the tech sector was juxtaposed with a plan to cut defense budgets, which unnerved some investors.
Raymond Yeung, greater China economist at ANZ Bank, forecasts Hong Kong's economy will expand by 2.7% this year. This growth projection comes after the economy recorded a 2.5% increase in 2024, a slowdown from the 3.2% growth in 2023. Yeung emphasized the importance of cost control as a strategy to spur economic growth.
"Cost control is the key word," said Raymond Yeung, greater China economist at ANZ Bank.
The central bank played its part by cutting benchmark interest rates by 25 basis points to 4.10%, a move aimed at stimulating economic activity. Meanwhile, Financial Secretary Paul Chan highlighted the government's commitment to cost-saving measures as a means to invigorate the economy.
In the broader regional market context, Australia's consumer price index also rose by 2.5% over the same period. The S&P/ASX 200, however, fell by 0.14%, closing at 8,240.70. Mainland China's CSI300 index ended the day with a gain of 0.87%, reaching 3,959.94. On the other hand, Tesla's shares suffered as its market capitalization dipped below $1 trillion.
The Hang Seng index itself climbed 3.63% during its last hour of trade, reflecting investor optimism amidst these economic developments.
Raymond Yeung further elaborated on the strategic direction for Hong Kong, emphasizing the significance of maintaining a business-friendly environment without increasing taxes.
"I think the financial secretary [will] want to position the city [and] continue to be business friendly, and don't really want to raise any tax," Yeung stated.
"Cost control is the key word. Bond issuing is also a key word to finance the capital expansion. I think this is the new normal of the Hong Kong government," he added.
These insights reflect the multi-faceted approach Hong Kong is adopting to navigate its economic challenges while leveraging opportunities in its tech sector.
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