Hang Seng fell 1.1%
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This week, the Hong Kong stock market exhibited a pattern of early gains followed by a pullback, with the Hang Seng Index declining 1.1% and the Hang Seng Technology Index fell 4.1% for the week. During the first three trading days, the market climbed amid positive catalysts, including supportive policies to boost consumption, stronger-than-expected macroeconomic data from China, and optimism surrounding the technology sector. These factors propelled the Hang Seng Index above the 24,000-point mark, reaching its highest level since February 14, 2022. However, in the last two trading days, a hawkish Fed policy decision and Trump’s tariff threats created a compounded shock to the market. Additionally, weaker-than-expected earnings from some leading technology and consumer electronics firms accelerated foreign capital outflows. As a result, the Hang Seng Index lost the 24,000-point level, with a weekly trading range of 5.4%.
In the U.S. stock market, as of Thursday, the S&P 500 gained 0.4%, the Dow Jones Industrial Average rose 1.1%, while the Nasdaq Composite declined 0.4%. On the macroeconomic front, data from the U.S. Department of Commerce showed that retail sales increased by just 0.2% m/m in February, missing expectations. Meanwhile, the previous reading was sharply revised down from -0.9% to -1.2%, marking the steepest drop since July 2021 and raising concerns over a slowdown in consumer spending. Adding to worries, Trump’s proposed tariffs on imports from key trading partners could push up prices and exacerbate inflationary pressures. Regarding interest rates, the Federal Reserve kept rates unchanged at its March policy meeting, in line with market expectations. The post-meeting economic projections revealed that Fed officials have broadly downgraded GDP growth forecasts for the next three years, with the 2025 growth estimate slashed by 0.4 percentage points to 1.7%. Additionally, the Fed slightly raised its unemployment rate forecast for this year, as well as its inflation outlook for both headline and core PCE over the next two years. Notably, the core PCE inflation forecast for 2025 was revised up the most, increasing by 0.3 percentage points to 2.8%. On the labor market front, data from the U.S. Department of Labor showed that initial jobless claims for the week ending March 15 came in at 223,000, higher than the previous reading but slightly below expectations. The prior figure was revised up from 220,000 to 221,000. Continuing jobless claims for the week ending March 8 totaled 1.892 million, lower than the previous reading but slightly above expectations, with the prior figure revised down from 1.87 million to 1.859 million.
In the A-share market, the CSI 300 Index maintained a sideways consolidation pattern over the first three sessions of the week. However, bearish momentum intensified significantly in the last two days, leading to a sharp decline of 2.3 %. Trading volume remained subdued throughout the week, with daily turnover consistently below the 50-D average volume. The broader market is in an Uptrend Under Pressure, short-term technical pressures are mounting, as the index fell below both the 21-D and 100-D MA during the week. Moving forward, the key level to watch is the 50-DMA; a breakdown below this level could trigger further downside, whereas a successful hold could set up a rebound, with resistance at Wednesday’s high of 4,025.30. On the macroeconomic front, data from the National Bureau of Statistics showed that China’s retail sales of consumer goods grew by 4% y/y in January-February, while industrial output from large-scale enterprises expanded by 5.9% y/y. Meanwhile, real estate development investment declined by 9.8% y/y, and urban fixed-asset investment accelerated to a 4.1% y/y increase. Regarding credit and liquidity, data from the People’s Bank of China (PBOC) showed that RMB loans increased by RMB 6.14 trillion in January-February, while RMB deposits grew by RMB 8.74 trillion. Aggregate social financing expanded by RMB 9.29 trillion, an increase of RMB 1.32 trillion y/y. As of the end of February, broad money supply (M2) rose 7% y/y to RMB 320.52 trillion, narrow money (M1) edged up 0.1% y/y to RMB 109.44 trillion, and currency in circulation (M0) grew 9.7% y/y to RMB 13.28 trillion. Net cash injections totaled RMB 456.2 billion over the period. The M2-M1 gap widened to 6.9 percentage points, marking a further expansion of 0.3 percentage points from the previous month. On the policy front, the General Office of the CPC Central Committee and the General Office of the State Council released the Special Action Plan to Boost Consumption, outlining 30 measures aimed at expanding domestic demand across various dimensions. The plan focuses on increasing household income, improving the consumption environment, expanding service consumption, and upgrading big-ticket purchases. Key initiatives include raising wage-based income, broadening property income channels, boosting rural income, optimizing urban and rural consumption infrastructure, reducing consumption restrictions, and enhancing policy coordination to strengthen consumer confidence and unlock spending potential. In terms of interest rates, the PBOC authorized the National Interbank Funding Center to announce the latest Loan Prime Rate (LPR) on March 20, 2025, which stood at 3.1% for the 1-year tenor and 3.6% for loans over 5 years, unchanged from the previous levels.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.2% for this week. Our Hong Kong Model Portfolio rose by 1.4% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 721.0% vs. a 18.0% up for the Hang Seng.
The best performer in our Hong Kong 33 was LAUNCH TECH(02488), it’s a leading manufacturer of automotive diagnostic equipment in China and a global core technology enterprise in the field of connected vehicles. The stock gained 26.2% this week. EPS rating stands at 99, RS rating of 98, and A/D rating of A-.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, while the key MA (5-D, 21-D, 50-D, 100-D, and 200-D) remain in a bullish alignment, the sharp declines on Thursday and Friday, accompanied by increased trading volume, led the index to break below the 5-D and 21-D MA. Moreover, the expanding volume during the decline indicates that although the short-term trend is not entirely broken, upward momentum has weakened significantly, and market divergence has intensified. Regarding the Southbound inflow via the HK-China Stock Connect, the market saw a net inflow of HKD 230.25 billion this week. While the trend of net inflows continued, the scale shrank significantly compared to previous periods, reflecting growing investor caution. Overall, in the short term, the market needs to digest the gap between policy expectations and external disruptions. However, the long-term fundamentals of China’s economic stabilization and technology sector upgrade remain intact. Investors should be mindful of uncertainties from external factors. Therefore, it is advisable to stay calm and rational, avoid chasing rallies blindly, and prioritize stocks with stronger-than-expected earnings and solid technical patterns, adopting a prudent and flexible approach to market volatility.
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published on March 21, 2025