US President Barack Obama's stimulus plan for the US economy failed to boost Hong Kong stocks, which slipped 0.23 per cent yesterday after a brief rally lasting two days.
Though the US$447 billion Obama proposed to inject into the world's largest economy to create jobs beat most expectations, the market appeared less interested in a jobs plan than the possibility of a third round of quantitative easing (QE3).
Huo Deming, professor of the China Centre for Economic Research at Peking University, said: 'Obama's job measures have to be passed by Congress and no one knows when that will happen. On the other hand, QE3 can be implemented by the Federal Reserve directly.'
Huo said that while it was hard to hazard a guess on the possibility that the US would carry out a QE3 by the end of this year, it 'seems less than 50 per cent'. 'The American dollar has been weak and a QE3 would only further weaken the US currency,' he said.
ATMD Financial Planning general manager Kenny Tang said Obama's stimulus plan had long been expected, so had little impact on the market. 'Though the scale is bigger, it will take a long time for his measures to make a difference,' he said.
The National Bureau of Statistics announcement yesterday that mainland consumer prices last month cooled slightly to 6.2 per cent from the 37-month-high of 6.5 per cent in July also affected the market.
'August's consumer price index was widely expected to be below 6 per cent,' Huo said. The tight monetary policy was likely to continue to combat inflation, he said. It was possible that Beijing would raise interest rates or increase the reserve requirement ratio on banks in the next few months if the CPI did not drop below 6 per cent this month, Huo said