Hong Kong lenders may not fully align their prime rate cuts with the Federal Reserve’s anticipated easing, but the United States (US)’ central bank’s likely move is expected to have a positive impact on the city’s equity and property markets, according to analysts.

After holding its benchmark interest rate steady for nine months, the Fed is widely expected to announce a rate cut by at least 25 basis points on Wednesday local time to support the weakening US labor market.

Hong Kong is likely to follow the US movement and banks may lower their prime lending rates, possibly aiding some borrowers. However, the scope for downward adjustment in local prime rates is limited, given the already low interest rate environment, according to Roen Yeung Ming-yee, senior associate director at Centaline Property Agency's research department.

READ MORE: HKMA keeps base rate unchanged, tracking US Fed move

Meanwhile, the potential US rate cut could support home prices and stimulate transactions in Hong Kong’s housing market, Yeung said. “Home prices are expected to gradually edge higher after stabilizing, as the local market is widely anticipating a US rate-cutting cycle. Transaction volumes are also likely to pick up,” she explained.

But the rental yields may have reached a peak, as the pace of rent increase is set to slow or even reverse following the summer high season, Yeung added.

Ning Bo, market strategist at China Merchants Securities International, believes the Fed’s expected move will benefit Hong Kong’s equity market by drawing international capital and increasing liquidity.

Ning said growth stocks may take the lead in a liquidity-friendly environment, while the technology sectors — particularly artificial intelligence (AI) and internet-related names — will continue to benefit from international fund inflows.

“The non-ferrous metal sector also has some tailwinds due to the Fed rate cut,” the strategist said. “Abundant liquidity boosts inflation expectations and reduces global economic recession risks, which may support the demand of non-ferrous metals.”

Lower interest rates and a weakened US dollar following the rate cut are usually favorable for non-ferrous metal prices, which may further boost the sector, Ning added.

Echoing the sentiment, Alvin Ngan, an equity strategist at Zhongtai Financial International, said sectors such as biotechnology, real estate, robotics, AI, and non-ferrous metals are likely to see a boost.

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The Hong Kong stock market as well as other emerging markets would be more appealing to overseas investors, as “the rate cut typically implies a decline in US Treasury yields”, he added.

But Ngan predicts that the stimulating effect may be more muted this time, as Hong Kong stocks have been hitting high and the market’s risk premium remains relatively low.

Hong Kong stocks remained flat on Tuesday, with the benchmark Hang Seng Index slightly down 0.03 percent to close at 26,438.51 points. In the morning trading session, the index reached a record four-year high of 26,601.59.

Contact the writer at gabylin@chinadailyhk.com