For the first time in 14 years, the Politburo of China, which consists of 25 members led by General Secretary Xi Jinping, has shifted its monetary policy stance from “prudent” to “moderately loose.” This significant change propelled HSI futures from a morning low of 19,730 to 21,359, marking an approximate 8% increase. This shift lays the groundwork for a robust rally in Hong Kong and Chinese markets in 2025, with the HSI potentially reaching around 25,000.
On one hand, the Chinese Communist Party (CCP) is demonstrating support for its equity markets through strong policy announcements. On the other hand, former President Trump appears to be adopting a more transactional and pragmatic approach toward China. While his tweets can certainly create volatility, any dips in the market seem like buying opportunities.
In addition to the change in monetary policy, the Politburo emphasized the need for authorities to implement “more proactive fiscal policies,” signaling that China is prepared to take the strongest measures to support its deflationary economy for the first time since 2008. The technology sector in China is particularly promising, with companies like Xiaomi, Alibaba, and Xpeng poised for growth.
Meanwhile, U.S. equities have taken a pause as investors await tomorrow’s Consumer Price Index (CPI) data. In a separate development, China has opened an investigation into Nvidia over allegations of violating anti-monopoly laws and has extended restrictions on key supplies related to drones.
In summary, it was an interesting day for those positioned long on China and short on U.S. equities.
Cryptocurrency markets also took a breather, reflecting the correlation between risky assets like U.S. tech stocks and crypto. Bitcoin is currently trading at $98,146, while Ethereum is at $3,772. However, this dip presents a buying opportunity as fresh liquidity injections from China are likely to support the ongoing asset bubble.