Analysis of Investment Strategies Against the Background of China-US Monetary Policy Divergence

According to the latest market data, China and US stock markets have shown obvious divergent trends in the second half of 2025. From June 1 to now, the Shanghai Composite Index has performed the best, rising by 15.3%, while the US S&P 500 Index has risen by 13.2% and the Hong Kong Hang Seng Index has risen by 10.1%[0]. In terms of volatility, the annualized volatility of the Hang Seng Index reaches 18%, significantly higher than 12% of US stocks and 13% of A-shares[0], reflecting the high volatility characteristics of the current market.

The Federal Reserve did take interest rate cut actions in December, but long-term US Treasury yields rose instead of falling, which reflects a core contradiction:

[1]. Market data shows that although the Federal Reserve cut interest rates by 25 basis points, investors’ expectations for further rate cuts instead pushed up long-term yields[2].

The United States is currently facing the impossible trinity dilemma of interest rates, exchange rates, and debt:

1. Three methods to lower long-term interest rates
   :
   • Treasury Department injects liquidity
   • Repurchase long-term bonds and issue medium-short-term bonds
   • Federal Reserve directly implements QE

2. Constraints on policy choices
   :
   • Fiscal liquidity injection may push up inflation expectations
   • Bond operations may distort the yield curve
   • Restarting QE may weaken policy credibility[3]

Based on current Federal Reserve balance sheet data and changes in deposit institutions’ reserves, liquidity tightening is expected to last until

. Main basis:

• The usage of the Federal Reserve’s reverse repo tool remains at a historical high
• Bank reserve ratios are close to historical lows
• The balance of the Treasury General Account is still high[4]

China chose the exchange rate stabilization strategy and bore the pressure on domestic demand; now it’s the United States’ turn to face the test of this choice[5]. Specific manifestations are:

• Foreign exchange reserves have declined significantly since 2022
• The RMB exchange rate remained relatively stable until 2025 before showing a slight upward trend
• The central bank stabilized the exchange rate by lowering the foreign exchange deposit reserve ratio and other methods[6]

A-share liquidity tightening is mainly affected by the following factors:

1. External liquidity tightening
   : Federal Reserve policies have led to global US dollar liquidity contraction
2. Limited internal policy space
   : Domestic monetary policy easing is limited to stabilize the exchange rate
3. Market structural problems
   : Superposition of factors such as real estate adjustment and local debt

A-share liquidity tightening is expected to last

, with key observation indicators:

• Changes in social financing growth rate
• Northbound capital flows
• Central bank monetary policy operations

:

• Current point: 25,494 points
• Retracement from monthly high: 5.83%
• Rebound space from low: 1.09%[0]

:

1. China Mobile (0941.HK)
   :
   • Stock price: HK$83.75
   • P/E: 11.57x
   • Market capitalization: HK$1.73 trillion
   • Valuation is at a historical low, with defensive value[0]

2. Alibaba Group (9988.HK)
   :
   • Stock price: HK$144.10
   • P/E:19.99x
   • Market capitalization: HK$2.67 trillion
   • Still has room to recover compared to the 52-week high[0]

3. Xiaomi Group (1810.HK)
   :
   • Stock price: HK$40.08
   • P/E:25.21x
   • Market capitalization: HK$1.04 trillion
   • Strong tech attributes, benefiting from the AI theme[0]

4. Industrial and Commercial Bank of China (1398.HK)
   :
   • Stock price: HK$6.11
   • P/E:5.61x
   • Market capitalization: HK$2.73 trillion
   • Extremely undervalued, with value investment opportunities[0]

:

1. Technical signals
   : Start building positions when the Hang Seng Index corrects to around 25,000 points
2. Liquidity indicators
   : Observe signals of the Federal Reserve’s policy shift
3. Fundamental improvement
   : Pay attention to signs of China’s economic recovery

:

1. Tech stocks
   : Benefit from the development of the AI industry chain
2. High-dividend stocks
   : Defensive sectors such as banking and telecommunications
3. Consumer stocks
   : Benefit from domestic demand recovery

:

1. Position management
   : Build positions in batches to avoid one-time heavy positions
2. Stop-loss setting
   : Set stop-loss below key support levels
3. Hedging tools
   : Appropriately use derivatives such as options

• A-shares
  : Remain cautious, focus on liquidity improvement signals
• Hong Kong stocks
  : Lay out high-quality targets at low prices, focus on allocating undervalued high-dividend stocks
• US stocks
  : Relatively strong, but need to be alert to overvaluation risks

• Pay attention to the timing of the Federal Reserve’s policy shift
• Lay out sectors that benefit from the easing of China-US relations
• Attach importance to long-term value investment opportunities of high-quality companies

: The current market adjustment is a structural opportunity rather than a systemic risk. The undervaluation of Hong Kong stocks provides a rare investment opportunity, but it is necessary to wait patiently for the inflection point signal of liquidity improvement.

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[0] Jinling API Data
[1] Bloomberg - “美債市場告別十年輝煌！美國銀行：做多大宗商品是2026年最佳” (https://hk.finance.yahoo.com/news/美債市場告別十年輝煌-美國銀行-做多大宗商品是2026年最佳)
[2] WSJ - “对美联储进一步降息的期待吸引买家重返债市” (https://cn.wsj.com/articles/hope-for-more-rate-cuts-is-tempting-buyers-back-to-bonds-12435244)
[3] Zhihu - “美联储12月降息25bp，市场定价是否会反向回归理性” (https://www.zhihu.com/question/1981645887513048198)
[4] Bloomberg Data Chart - Federal Reserve Balance Sheet and Liquidity Indicators
[5] User-provided Analysis Content
[6] Yahoo Finance - Foreign Exchange Reserves and RMB Exchange Rate Trend Analysis