Hang Seng fell 2.5%
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This week, the Hong Kong stock market came under pressure, with the Hang Seng Index down 2.5% and the Hang Seng TECH Index down 3.5%. The market, influenced by a confluence of factors, overall exhibited a volatile downward trend. At the beginning of the week, renowned investor Zhu Xiaohu’s assertion that the commercialization of humanoid robots is “unclear” continued to reverberate, affecting the technology sector. In the middle of the week, safety concerns over autonomous driving triggered by the Xiaomi Auto SU7 incident further dampened market sentiment, and Xiaomi’s stock price remained under pressure. On Thursday, the U.S. “reciprocal tariff” policy was officially implemented, sharply increasing global trade uncertainty, with the Hang Seng Index opening 2.4% lower on a gap down, underscoring the pulse-like impact of external factors.
In the U.S. stock market, as of this Wednesday, the S&P 500 and Nasdaq both rose 1.6%, while the Dow Jones Industrial Average increased by 1.5%. In terms of macroeconomics, data from the U.S. Department of Commerce show that the February PCE Price Index increased 2.5% y/y, in line with expectations and the previous reading; the PCE Price Index rose 0.3% m/m, also matching expectations and the previous reading. The core PCE Price Index, the Fed’s key inflation gauge, increased 2.79% y/y in February, reaching a new high since December 2024 and exceeding both expectations and the previous reading; the core PCE Price Index rose 0.4% m/m, not only higher than expectations and the previous reading but also marking the largest increase since January 2024. The PCE report has heightened market concerns over persistent inflation and potential stagflation risks, with traders continuing to bet that the Fed will start cutting rates in July. Under the impact of tariff policies, the University of Michigan’s long-term inflation expectations have risen to a 32-year high, while the consumer confidence index has fallen to its lowest level in over two years. Specifically, the final reading for the University of Michigan’s one-year inflation expectations in March reached 5%, higher than both expectations and the initial reading; the final reading for the five-year inflation expectations stood at 4.1%, the highest since February 1993, also exceeding expectations and the initial reading. ISM data show that the U.S. ISM Manufacturing Index for March came in at 49, below expectations and lower than the previous reading, marking the first time since December 2023 that it has fallen into contraction territory. Notably, its price index recorded a new high since June 2022, indicating that inflationary pressures persist. On the policy front, Trump signed an executive order implementing new tariff policies, imposing a uniform 10% baseline tariff on 95% of global goods, while also applying differentiated high tariffs to China (34%), the EU (20%), Japan (24%), and Mexico (15%); automobile-related goods are subject to an additional 25% tariff. In the labor market, the ADP Employment Report, often referred to as the “mini-NFP,” showed a stronger-than-expected rebound in March, with ADP Research data indicating that 155,000 jobs were added during the month, exceeding expectations and the previous reading. The U.S. Bureau of Labor Statistics reported that February JOLTS job openings stood at 7.568 million, below expectations and lower than the previous month, while layoffs remained stable. Overall, while the labor market shows signs of cooling, the slowdown is moderate.
In the A-share market, due to the Qingming Festival holiday on Friday, during the four trading days this week, the CSI 300 Index fell cumulatively by 1.4%, dropping below its 50-DMA, and the trading volume on each day was below the 50-D average. The current market continues to face resistance in its upward trend, with support located at the low of 3785.16 points recorded on February 5, 2025, and resistance at the 50-DMA. On the macro level, the latest data from the National Bureau of Statistics shows that in March, China’s Manufacturing PMI, Non-Manufacturing PMI, and Composite PMI were 50.5%, 50.8%, and 51.4%, respectively, up by 0.3, 0.4, and 0.3 percentage points from the previous month, marking a two-month consecutive month-over-month increase. Among these, the Construction PMI has risen for two consecutive months, reaching a new high since June 2024. In other developments, the Ministry of Finance injected capital into Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank by issuing 500 billion yuan of special government bonds, directly enhancing the banks’ capital strength, boosting their credit issuance capacity, and further stabilizing the financial system. This move effectively alleviates banks’ net interest margin pressure and benefits both the banking sector and overall market liquidity. Notably, the four major banks completed their private placements at a premium above market price, sending a clear policy support signal and driving a recovery in the valuation of the financial sector. Meanwhile, the State-owned Assets Supervision and Administration Commission is planning a strategic restructuring of state-owned vehicle enterprises, aiming to build leading car companies with global competitiveness. This initiative is expected to accelerate the concentration in the automotive industry and directly benefit leading car manufacturers. In addition, the China Securities Regulatory Commission has included bank wealth management and insurance asset management products in the IPO preferential allotment list, broadening the channels for long-term capital to enter the market; Central Huijin now holds over 1 trillion yuan in ETF market value, significantly enhancing market stability and providing important support for blue-chip stocks and index funds.
Leading stocks fall this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.2% for this week. Our Hong Kong Model Portfolio fell by 6.6% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 726.7% vs. a 13.9% up for the Hang Seng.
The best performer in our Hong Kong 33 was WL DELICIOUS(09985), it’s a leading enterprise in China’s spicy bar industry. The stock gained 12.7% this week. EPS rating stands at 40, RS rating of 97, and A/D rating of A+.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, this week the Hang Seng Index received strong support at the 50-DMA. Even though it was hit by the impact of the tariff policy on Thursday, the trading volume did not increase significantly; the contraction in volume reflects a strong wait-and-see sentiment in the market. Currently, support is located at the 50-DMA, while resistance is at the 21-DMA. The Southbound inflow via the HK-China Stock Connect continued net inflows this week, with a total net inflow of HK$59.211 billion, further expanding compared to last week. Notably, Thursday’s single-day net inflow set the second-highest record ever, and the weekly net inflow total ranked as the fourth highest in history. In summary, the tariff impact and sentiment disturbances may keep the market in a volatile pattern, but if global liquidity expectations improve coupled with additional domestic policy support, Hong Kong stocks may see a phased recovery after overselling. At this stage, it is recommended that investors remain calm and rational, avoid blindly chasing rising stocks, and prioritize those with better-than-expected performance and robust technical patterns, so as to respond flexibly to market volatility with a steady strategy.
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published on April 3, 2025