The Federal Reserve announced a 25-basis-point rate cut, lowering the target range for the federal funds rate to 3.75%-4.00%. This marks the second consecutive meeting with a rate cut and the fifth since September 2024. Fed Chair Powell struck a cautious tone after the meeting, hinting at a potential pause in December and stating it is "far from certain."

Market reactions were intense, with traders lowering the probability of a December rate cut to 65%. U.S. stocks plummeted during the session, and Treasury yields surged. The Fed’s sustained rate cuts typically benefit the Hong Kong stock market. On one hand, lower interest rates ease liquidity pressure on Hong Kong stocks, particularly supporting interest rate-sensitive sectors like technology and finance. On the other hand, if the U.S. economy achieves a soft landing, it would improve global growth expectations and boost sentiment in the Hong Kong stock market.

Although Powell’s "pause" signal may trigger short-term volatility, the overall direction of the rate-cutting cycle remains unchanged. With Hong Kong stock valuations at historically low levels, the Fed’s policy shift could present a medium- to long-term strategic opportunity. Investors may focus on oversold, high-quality targets sensitive to interest rates, such as the Hong Kong Stock Connect Financial ETF (513190), while remaining vigilant about volatility risks stemming from global economic uncertainty.