Hong Kong, China stocks end Monday flat as investors shy away from big bets ahead of trade talks, Fed meeting

Stocks listed in Hong Kong and mainland China ended flat on Monday, with key benchmark indices giving up gains made during the day as investors stayed away from big bets ahead of what could be an eventful week.

In Hong Kong, the Hang Seng Index ended at 27,576.96, up 0.03 per cent, following a strong performance by some Chinese banking stocks. China Construction Bank rose by 0.88 per cent to HK$6.88 and Ping An gained by 0.55 per cent to HK$73.8, while Bank of China gained by 0.28 per cent to HK$3.6. Turnover for the main board stood at HK$94 billion (US$11.98 billion).

Investors will draw more clues from the United States this week, where a new round of US-China trade talks is expected to take place. Senior figures from both sides will try and reach a deal before a 90-day trade truce expires on March 1. Meanwhile, a meeting of the Federal Open Market Committee (FOMC) on January 29-30 will provide indications about whether the US Federal Reserve will pause further rate increases this year, as is widely expected by the market.

“Most market participants are expecting the Federal Reserve will not hike rates at the conclusion of the two-day meeting this week. There is general expectation the Fed will maintain a more dovish stance compared with the last FOMC meeting, in December,” said Alex Wong, a director at Hong Kong financial services company Ample Finance Group.

In Beijing, the People’s Bank of China (PBOC) said last week it would launch a central bank bills swap mechanism for dealers engaged in open-market operations, allowing them to swap perpetual bonds issued by Chinese banks for central bank bills. The move is expected to bolster liquidity for perpetual bonds, and is being viewed as encouraging more bond issuances by banks.

The move by the central bank follows a 40 billion yuan perpetual bond issue approval for the Bank of China, the first of its kind in the country. China’s banking regulator said perpetual bonds are a way of improving capital adequacy ratios at lenders, and are expected to help banks boost lending and support for the real economy.