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Hong Kong stocks face double threat: US inflation and yen carry-trade risks

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Zhang Shidongin ShanghaiPublished: 2:19pm, 8 Sep 2026

Hong Kong and mainland Chinese stocks face a high-stakes week as investors navigate US inflation data, a strengthening Japanese yen and looming monetary policy decisions by two of the world’s most influential central banks.

Friday’s consumer price index in the United States will take centre stage, with the report arriving just ahead of the Federal Reserve’s policy meeting next week. With Fed Chair Kevin Warsh already signalling a strong emphasis on curbing inflation, market analysts believe a higher-than-expected reading could heighten the chances of a benchmark rate increase.

Meanwhile, the Japanese yen has appreciated to its strongest level against the US dollar in seven months, clouding the outlook for global equity markets. The shift is weighing on the “carry trade” – an investment strategy where traders borrow yen at low interest rates to buy higher-yielding foreign assets.

At its rate-decision meeting next week, the Bank of Japan is widely expected to raise benchmark borrowing costs.

For stocks in Hong Kong and mainland China, these pressures could compound existing challenges, including elevated US Treasury yields and lingering volatility in hi-tech sectors. Higher interest rates in the US and an unravelling of the yen-funded carry trade could put further pressure on the two markets, hitting Hong Kong stocks particularly hard because of their greater sensitivity to overseas capital flows, according to market analysts.

“In the event of an interest-rate increase, US Treasury yields will remain elevated,” said Chen Meng, an analyst at Soochow Securities. “That will hold back a rebound in Hong Kong stocks.”

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