[ET Net News Agency, 16 December 2025] Wall Street was cautious ahead of Tuesday's
nonfarm payrolls report, with all three major US indices slipping overnight. Hong Kong
stocks opened 81 points lower this morning, and persistent declines in both Shanghai and
Shenzhen markets dragged the HSI deeper into negative territory as the session wore on.
The index fell as much as 510 points intraday and closed the morning at 25,139, down 489
points or 1.9%, with main board turnover close to HKD 107.2 billion. The Hang Seng China
Enterprises Index dropped 188 points or 2.1% to 8,729, while the Hang Seng Tech Index fell
132 points or 2.4% to 5,365.

"Lee Wai Kit: Japan rate hike unlikely to trigger fresh unwinding; overly strong renminbi
a headwind for exports"

This week brings a slew of major global events, including key US economic data releases
and a widely expected rate hike by the Bank of Japan. Amid previous market volatility, the
renminbi continued to climb, with the offshore rate breaking through 7.04 this morning to
reach 7.0373. Lee Wai Kit, a financial commentator of TF International, told ET Net News
Agency that the recent weakness in the US Dollar Index is the main factor driving the
renminbi's strength. While there are market concerns that a BOJ rate hike could trigger a
wave of unwinding in carry trades and dampen risk appetite, Lee believes that the
renminbi's recent gains are not directly related to the yen's movements, with dollar
dynamics remaining paramount. He added that although a US rate cut followed by a BOJ hike
would widen the US-Japan rate differential and could spark some unwinding of carry trades,
the impact on equity markets remains to be seen. With two weeks of advance signalling from
the BOJ, any required deleveraging should already be largely complete, suggesting the
current market weakness is more psychological, linked to lingering memories of last year's
carry trade unwind, than driven by actual flows.
Lee expects the renminbi's strength to persist in the short term, especially with the
year-end and Lunar New Year approaching, when liquidity management typically supports the
currency. However, with ample liquidity in the Mainland China banking system, he does not
foresee a funding shortage this year. After last year's yen carry trade unwind, the
USD/CNH rate briefly surpassed 7; a similar spike could follow a BOJ rate hike, but Lee
sees the renminbi as already quite strong at 7. An excessively strong currency is not
favourable for China's exports, and even if the renminbi breaks below 7, any further rally
is likely to be short-lived.

"Weak data hits Hong Kong and Mainland China stocks; Reduce tech holdings if HSI breaches
key levels"

While the renminbi remains firm, both Hong Kong and Mainland China equities have
weakened. Lee attributes this to both psychological effects surrounding the BOJ's
anticipated move and a string of disappointing Chinese economic data, which has weighed on
sentiment and triggered a broad-based pullback in A-shares, dragging Hong Kong stocks
lower. With markets now in a wait-and-see mode, Lee advises investors without current
positions to stay on the sidelines until after the BOJ decision. For those already holding
shares, it's time to consider stop-loss strategies. Lee suggests evaluating holdings by
sector, banks and state-owned lenders, with their more defensive, income-oriented
profiles, should be less affected by expected volatility. However, for tech stocks, if
individual shares have already fallen more than 10%, investors should consider trimming
positions. If the HSI drops below 25,000, or even further to breach 24,800, reducing
exposure becomes even more prudent to manage downside risk.
He added that both Hong Kong and Mainland China markets are now testing last month's
support levels, with the Shanghai Composite approaching the 3,800 mark. If 3,800 is lost,
it will be difficult for the HSI to hold above 25,000, making this a crucial time to
implement defensive portfolio adjustments.