Hang Seng fell 1.1%
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This week, Hong Kong stocks saw an initial rally followed by a pullback, with the Hang Seng Index declining 1.1% and the Hang Seng TECH Index falling 2.4%. Early in the week, gains were buoyed by innovative drug policies and consumer stimulus measures. However, momentum faded in the latter half amid fluctuations in expectations over the Federal Reserve’s rate cuts, Trump’s imposition of a 25% auto tariff, and divergence in tech stock earnings, triggering accelerated foreign capital outflows and sustained contraction in trading volumes. While expectations of expanded domestic special-purpose bond issuance provided some market support, corporate earnings divergence became evident, as evidenced by SMIC’s record-high revenue contrasting with a 23.3% drop in net profit. Sector-wise, the innovative drug sector led gains while gold’s safe-haven appeal intensified. AI computing power faced pressure from Goldman Sachs’ downgraded expectations, yet smart driving concepts bucked the trend and remained active. External uncertainties intensified, with US debt pressures and tariff shocks impacting global supply chains, prompting southbound capital flows to increase positions in defensive sectors such as utilities to hedge risks.
In the U.S. stock market, as of this Thursday, the S&P 500 Index rose 0.5%, the Nasdaq Composite gained 0.1%, and the Dow Jones Industrial Average advanced 0.8%. In macroeconomic data, according to S&P Global, the preliminary reading of the U.S. March Markit Manufacturing PMI came in at 49.8, falling below the expansion-contraction threshold and missing both expectations and the previous reading. The preliminary Markit Services PMI for March stood at 54.3, surpassing expectations and the prior reading. The preliminary Markit Composite PMI came in at 53.5, also exceeding expectations and the previous figure. According to data from the U.S. Bureau of Economic Analysis, the final estimate for the annualized quarter-over-quarter GDP growth rate in Q4 2024 was revised up from 2.3% to 2.4%, beating market expectations. Meanwhile, the increase in the Q4 core PCE price index was unexpectedly revised down from 2.7% to 2.6%. The U.S. Department of Commerce reported that preliminary durable goods orders for February rose 0.9% m/m, significantly exceeding the expected -1%. The January figure was also revised up to a 3.3% m/m increase, higher than the previously reported data. Core durable goods orders rose 0.7% m/m, marking the largest monthly increase since March 2022. However, economists widely expect U.S. economic growth to slow in 2025, primarily due to concerns over tariff policies. On tariffs, President Donald Trump announced a 25% tariff on countries purchasing oil and gas from Venezuela, as well as a 25% tariff on all non-U.S.-manufactured automobiles, stating that the auto tariffs would be permanent. These measures are set to take effect on April 2. Additionally, Trump expressed his hope for Federal Reserve rate cuts during a Cabinet meeting. According to the CME FedWatch Tool, as of March 28, the market-implied probability of a 25-basis-point rate cut in May stood at 11.6%, while the probability of a 25-basis-point cut in June was 58.5%. In the labor market, data from the U.S. Department of Labor showed that initial jobless claims for the week ending March 22 stood at 224,000, lower than both the prior reading and expectations. The previous figure was revised up from 223,000 to 225,000. Continuing jobless claims for the week ending March 15 totaled 1.856 million, also below the prior reading and expectations, with the previous figure revised down from 1.892 million to 1.881 million.
In the A-share market, the CSI 300 Index declined by 0.4% this week, remaining in a sideways consolidation throughout the period. Trading volume continued to be subdued, decreasing daily, with each session’s volume falling below the 50-D average. The market is currently facing resistance in its upward momentum, with a shift toward defensive positioning. The previously leading technology sector continued to pull back, while funds flowed into low-valuation, high-dividend sectors and cyclical stocks. Moving forward, attention should be given to the support strength of the 50-DMA. A breakdown below this key level could lead to further declines, while a successful defense could see resistance at Wednesday’s high of 4,025.30 after a rebound. On the macroeconomic front, data from the National Bureau of Statistics showed that industrial enterprises above a designated size recorded a total profit of RMB 910.99 billion in January–February, down 0.3% y/y, with the decline narrowing by 3.0 percentage points from last year. Profits in the automobile and electronics sectors grew significantly, reflecting notable improvements in manufacturing. Data from the Ministry of Finance indicated that in January–February 2025, national general public budget revenue totaled RMB 4.3856 trillion, down 1.6% y/y. Among this, tax revenue was RMB 3.6349 trillion, declining 3.9% y/y, while non-tax revenue reached RMB 750.7 billion, up 11%. Stamp duty revenue was RMB 84.9 billion, increasing 16.9% y/y, with securities transaction stamp duty reaching RMB 23.8 billion, up 58.9%. On the expenditure side, general public budget spending in January–February 2025 amounted to RMB 4.5096 trillion, marking a 3.4% y/y increase. On the policy front, the People’s Bank of China (PBOC) stated in its Q1 monetary policy meeting that it would implement a moderately accommodative monetary policy, with plans to cut the reserve requirement ratio (RRR) and interest rates at an appropriate time. The PBOC also emphasized monitoring long-term yield changes from a macroprudential perspective and exploring innovative structural tools. Additionally, the Ministry of Finance released the 2024 China Fiscal Policy Execution Report, which outlined that fiscal policy in 2025 would be more proactive, sustained, and forceful, focusing on five key aspects: 1. Raising the fiscal deficit ratio; 2. Issuing a larger scale of government bonds;3. Optimizing expenditure structure and enhancing targeted allocations; 4. Strengthening efforts to prevent and mitigate risks in key areas;5. Increasing transfer payments to local governments to bolster financial resources and secure the “three guarantees” (basic living needs, salaries, and public services).
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 0.9% for this week. Our Hong Kong Model Portfolio fell by 1.7% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 728.2% vs. a 16.7% up for the Hang Seng.
The best performer in our Hong Kong 33 was 3SBIO(01530), it’s a leading biopharmaceutical enterprise in China. The stock gained 19.0% this week. EPS rating stands at 98, RS rating of 95, and A/D rating of A+.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index briefly broke above the 20-DMA early in the week, but the sustained contraction in trading volumes indicated weakening bullish sentiment and fragile upward momentum. Ultimately, the index closed below the 21-DMA by week’s end, with the 5-DMA crossing below the 21-DMA, signaling intensified selling pressure and heightened alertness for further correction risks. In terms of the Southbound inflow via the HK-China Stock Connect, this week saw a net inflow of HKD 37.18 billion, extending the previous inflow trend with increased scale. Overall, the current Hong Kong stock market exhibits a “tug-of-war between policy support and external risks” dynamic. While domestic special-purpose bond expansion and sustained Southbound inflows provide downside support, technical breakdown coupled with foreign capital outflows suggest insufficient release of short-term adjustment risks. The market is expected to continue a volatile bottom-testing pattern in the near term. Attention should be paid to the validity of the March 13 low of 23,197.3 points. If Southbound inflows sustain and external headwinds moderate, oversold recovery momentum may gradually accumulate. At this stage, investors are advised to remain calm and rational, avoiding blind chasing of rallies. Priority should be given to stocks with earnings exceeding expectations and stable technical patterns, adopting a prudent yet flexible strategy to navigate market volatility.
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published on March 28, 2025