Residential buildings stand in Tseung Kwan O. (PHOTO PROVIDED TO CHINA DAILY)

The market has finally decided to ignore the trade disputes initiated by US President Donald Trump and concentrate on other fundamentals, particularly the cost of funds.

Interest rate cuts are taking center stage in the minds of investors in the United States as well as those in Hong Kong and other major markets around the world. Stock analysts in the US predict that there will be at least one rate cut in 2019, while central banks in several European economies have seen the need to keep the cost of money low to keep their economies from contracting.

The Chinese mainland is widely expected to keep pumping money into the system to maintain economic growth at above 6 percent by lowering banks’ reserve requirements and initiating a host of fiscal stimuli, including tax cuts. 

As in the past, a part of the increased liquidity would find its way into Hong Kong’s asset markets to hedge against further depreciation of the Chinese yuan.

The projected inflow of overseas capital would allow banks in Hong Kong to keep local interest rates at a discount to those of the US without putting too much strain on the linked exchange-rate system. 

To be sure, low interest rates can eat into banks’ profit margins. But banks are more worried that raising rates could dampen demand for the highly lucrative mortgage loans, which, in turn, would depress property prices.

Investors who were rushing back into the market this past week obviously believed that the trade dispute can’t get much worse, even if both sides fail to reach any agreement later this month at the G20 meeting in Tokyo. It seems that the US is in no hurry to escalate the dispute by making good its threat of imposing tariffs on additional Chinese imports.

That doesn’t mean that the Hong Kong economy, which slowed significantly in 2019’s first quarter, will grow at a brisker pace. In fact, economists expect that the performance in the second quarter will be worse than the previous quarter.

But earlier concern about the onset of a property down cycle appears to be fading as prospective homebuyers are returning in droves, snapping up apartments put up for sale by developers. 

As an increasingly important pillar of the economy, the property sector is the most trusted barometer of economic health, which appears to be in much better shape than just a few months ago.