Hang Seng fell 2.3%
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This week, the Hong Kong stock market saw a pullback after reaching highs, with the Hang Seng Index dropping 2.3% and the Hang Seng Tech Index falling sharply by 5.0%. On the news front, signs of a slowdown in the U.S. economy have increased, with stagflation risks quietly emerging, while inflation expectations have risen again. Additionally, the U.S. will impose a 10% tariff on imports from China starting March 4. A combination of multiple negative factors, along with some sectors in the Hong Kong market having seen significant gains recently and accumulated substantial profit-taking, has led to funds opting to lock in profits as the market environment changes.
Regarding the US stock market, as of Thursday, the S&P 500 declined 2.5%, the Nasdaq tumbled 5.0%, and the Dow Jones Industrial Average slipped 0.4%。S&P Global data showed that the preliminary Markit Manufacturing PMI for February was 51.6, higher than expectations and the previous reading, marking the highest level since June 2024 and the second consecutive month of expansion; the preliminary Markit Services PMI came in at 49.7, below expectations and the previous reading, unexpectedly slipping into contraction, the lowest level since January 2023; the preliminary Markit Composite PMI was 50.4, below expectations and the previous reading, hitting a more than one-year low as weakness in the services sector dragged down overall activity, reflecting the impact of policy uncertainty under the Trump administration on orders and business expectations. Additionally, data from the Bureau of Economic Analysis showed that the revised annualized q/q growth rate of U.S. real GDP in Q4 was 2.3%, unchanged from the initial estimate. The revised annualized q/q core PCE for Q4 was 2.7%, higher than the initially reported 2.5%。During a recent Cabinet meeting, President Trump stated that the U.S. will impose a 25% tariff on goods imported from Mexico and on non-energy goods imported from Canada starting April 2. He also indicated that tariffs on EU exports to the U.S. would be announced soon, with a possible 25% tariff applying to automobiles and all other goods。Data from the Department of Labor showed that initial jobless claims for the week ending February 22 were 242K, higher than expectations and the previous reading, which was revised up from 219K to 220K. Continuing jobless claims for the week ending February 15 were 1.862M, with the previous reading revised down from 1.869M to 1.867M. Elsewhere, President Trump stated that Ukrainian President Zelensky will visit Washington, D.C., on February 28, and the U.S. and Ukraine will sign agreements related to rare earths and other areas. Ukrainian Prime Minister Shmyhal announced that the Ukrainian government has approved a mineral framework agreement with the U.S.
In the A-share market, the CSI 300 Index declined 2.2% this week, falling below the 21-DMA, while daily trading volume remained above the 50-day average, and the weekly turnover was like last week. The market is still in a rally attempt phase, with support at the 50-DMA and secondary support at the January 13, 2025, low of 3,704.11. Resistance stands at the psychological level of 4,000。On the policy front, the 2025 No. 1 Central Document was released as scheduled, once again focusing on the “three rural issues” (agriculture, rural areas, and farmers). It emphasizes leveraging technological innovation to drive the aggregation of advanced production factors, encouraging region-specific development of new agricultural productivity, supporting smart agriculture, and expanding the application of AI, big data, and low-altitude technology。Additionally, the Ministry of Commerce will fully implement a negative list for cross-border services trade and, in collaboration with relevant departments, explore a new batch of opening-up measures in sectors such as telecommunications, education, culture, healthcare, and finance. Meanwhile, the latest data from the Ministry of Commerce showed that China’s total services trade reached RMB 7.5T in 2024, a record high, and exceeded $1T for the first time in USD terms. Service retail sales grew 6.2%, and household spending on services rose 7.4% y/y, contributing 63% to overall consumption growth. Since 2024, travel services have maintained rapid growth, with total imports and exports reaching RMB 2.0511T for the year, up 38.1%, making it the largest segment of services trade. Among them, exports surged 156.8%, while imports increased 29.3%。Next week, as the Two Sessions are convened, the policies announced will have a significant impact on the market, warranting close attention.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 5.8% for this week. Our Hong Kong Model Portfolio fell by 5.4% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 653.9% vs. a 14.3% up for the Hang Seng.
The best performer in our Hong Kong 33 was GIANT BIOGENE(02367), it’s a pioneer and leader in China’s professional skin care product industry based on bioactive ingredients. The stock gained 3.1% this week. EPS rating stands at 76, RS rating of 87, and A/D rating of A-.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, although the Hang Seng Index reached a new high on Thursday, the highest since December 14, 2021, it experienced a pullback on the same day with an increase in trading volume. On Friday, the index saw a larger volume drop, breaking below the 5-DMA, suggesting potential short-term downside pressure. As for Southbound inflows, the trend of net inflows continued this week, marking the 27th consecutive week of such inflows, with this week’s net inflow reaching a new historical high of HKD 74.967B. Overall, the market showed signs of a technical pullback due to multiple negative news factors. Next week, with the opening of the Two Sessions, the policy direction announced during the meetings will have a key impact on market trends. In this stage, investors are advised to remain calm and rational, avoid blindly chasing gains, and focus on stocks with better-than-expected earnings and stable technical setups, adopting a cautious strategy to navigate market volatility.
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Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
published on February 28, 2025