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Fed Hikes Rates, Treasury Yields Retreat, and China's Export Ambition
The US Federal Reserve raised its benchmark interest rate by 25 basis points for the first time in three years, moving against a backdrop of retreating 10-year US Treasury yields. The move prompted a reactive hike from the Hong Kong Monetary…
Fed Resumes Rate Hikes as Yields Soften
The US Federal Reserve's Federal Open Market Committee unanimously voted on Thursday to increase its benchmark interest rate by 25 basis points, establishing a target range of 3.75 to 4.00 percent. This marks the central bank’s first rate adjustment in three years. Federal Reserve chief Kevin Warsh cited prolonged high inflation as the impetus for the decision.
Following the Fed’s announcement, the 10-year US Treasury yield declined to 4.94 percent on Friday. This placed it below the 5 percent threshold, a level it had surpassed earlier in the week for the first time since 2023.
Asian Financial Hubs React
The Hong Kong Monetary Authority responded to the Fed’s action by raising its base rate to 4.25 percent. Despite this, the city’s three primary note-issuing banks—HSBC, Bank of China (Hong Kong), and Standard Chartered—maintained their prime lending rates unchanged.
Hong Kong also secured its position as Asia’s leading financial hub for the fourth consecutive time in the Global Financial Centres Index. This index assesses business environment, human capital, infrastructure, financial sector development, and market reputation. Hong Kong registered a score of 756, trailing London at 757 and New York, which topped the index with 761. Singapore followed with 755 points.
China's Expanding Global Export Share
A Goldman Sachs report forecasts a substantial increase in the average market share of Chinese companies in export markets, projecting a rise from 18 percent this year to 31 percent by 2035. During this period, their revenue is anticipated to grow 3.6-fold.
The report identifies significant growth potential in sectors housing what it terms “latecomers,” including robotaxis, e-commerce, and surgical robots. Conversely, “early achievers,” such as automakers, are expected to navigate more competitive landscapes.
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