[ET Net News Agency, 19 June 2025] The war between Israel and Iran has escalated, with
markets speculating that the United States may become involved in the conflict. The
Federal Reserve announced it would keep interest rates unchanged, and Chair Jerome Powell
stated that the impact of additional tariffs on inflation may prove more persistent,
predicting significant inflation in the coming months and indicating there is no urgency
to cut rates in the near term. US equities turned weaker. Asia-Pacific stock markets fell
across the board this morning. Among HSI constituents, only Henderson Land was unchanged,
while all others declined. At midday, the HSI closed at 23,231, down 479 points or 2
percent, with main board turnover exceeding HKD 123.3 billion. The China Enterprises Index
stood at 8,412, down 181 points or 2.1 percent. The Hang Seng Tech Index was at 5,090,
down 124 points or 2.4 percent.

"Cheung Chi Wai: HSI may remain weak, investors may consider reducing positions"

The US Federal Reserve announced it would leave interest rates unchanged for the fourth
consecutive meeting. At the press conference, Chair Powell said that the impact of
additional tariffs on inflation should become apparent over the coming months. Although
the Fed's dot plot still indicates two rate cuts this year, it is clear that some
officials are now lowering their expectations. Cheung Chi Wai, a joint managing director
at Prudential Brokerage Ltd, told ET Net News Agency that the US economic data has been
weaker and inflation has yet to recede, so it is not surprising that some officials have
shifted their stance. Furthermore, Powell adopted a hawkish tone last night, expecting at
least one rate cut this year, and no more than two.
On the Middle East, Iran's Supreme Leader Khamenei announced last night that the battle
had begun and even claimed there would be a "historic surprise". According to sources
cited by the Wall Street Journal, US President Trump has already approved plans to strike
Iran, which could happen within 24 hours, although final authorisation has not been given
as they are waiting to see if Iran will meet the demand to abandon its nuclear programme.
Cheung Chi Wai said the Middle East situation is severe, and it is highly likely that the
US will directly intervene in the conflict between Israel and Iran to force Iran into
unconditional surrender. Iran is now under significant pressure.
Cheung pointed out that the HSI fell below the 20-day moving average today (around
23,705). From a technical perspective, the index is likely to remain weak, and investors
may consider reducing their positions. The short-term support level is the lower line of
the Bollinger Bands, around 23,000. If the Middle East situation escalates, a move down to
the low seen on 2 Jun at 22,668 is expected.

"Positive catalysts for stablecoin concept have been priced in, investors should take
profits in stages"

On Wednesday 18 Jun, the US Senate formally passed the Guidance and Establishing
National Innovation in US Stablecoins Act (GENIUS Act), creating the first nationwide
regulatory framework for US dollar-linked cryptocurrency tokens (stablecoins). The news
prompted a rally in cryptocurrency-related stocks. Circle (US.CRCL) closed up more than
33.82 percent at USD 199.59, while Coinbase (US.COIN) closed up 16.32 percent at USD
295.29. Stablecoin-related Hong Kong stocks also opened sharply higher, with ZA Online
(06060) up 7.9 percent at HKD 21.95 and LianLian (02598) up 10.7 percent at HKD 11.56.
Cheung Chi Wai commented that there is limited upside left in the stablecoin concept and
it is not suitable to chase at high levels; instead, profits should be taken in stages. He
noted that ZA Online's gains are now below 1 percent, and OSL Group (00863) has even
turned negative. With the stablecoin concept having already rallied in May, this suggests
that the positive factors have largely been priced in. For example, ZA Online hovered
around HKD 11 in the second half of May and is now trading at around HKD 20, so most of
the good news has been reflected.
Regarding developments in stablecoins in both the US and Hong Kong, Cheung Chi Wai said
that issuing stablecoins is an inevitable trend. With stablecoins, merchants can transfer
funds peer-to-peer via accounts, without the need to convert to US dollars or other
currencies and transfer through banks, thus avoiding exchange rate risk. This makes
transactions faster and more convenient for businesses conducting trade.