Hang Seng raised 2.1%
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This week, the Hang Seng Index(HSI) rose 2.1%, while the Hang Seng Tech Index(HSTECH) gained 2.0%, with the overall Hong Kong stock market showing a choppy and consolidative trend.
At the start of the week, boosted by multiple positive catalysts, market sentiment surged, with the Hang Seng Index soaring 3.0% on Monday and trading volume significantly expanding—surpassing its 50-day average for the first time in nearly a month. However, in the following sessions, the market gradually returned to a more rational tone, and the index entered a phase of consolidation amid fluctuations.
On the news front, the most notable catalyst this week was the consensus reached during the high-level China-U.S. trade talks, where both sides agreed to significantly lower bilateral tariffs. The development provided a major boost to investor confidence, with several sectors rallying sharply in response to the expected tariff relief. Meanwhile, hedge funds increased their bullish bets on Chinese equities, adding further upward momentum to the market. Geopolitical tensions also eased somewhat, with India and Pakistan agreeing to a ceasefire and signs of de-escalation emerging in the Russia-Ukraine conflict. These developments helped improve market risk appetite and reduced the degree of geopolitical uncertainty weighing on sentiment.
In the U.S. stock market, as of this Thursday, the S & P 500 Index(0S&P5) has surged 4.5% for the week, the Nasdaq Composite(0NDQC) has jumped 6.6%, and the Dow Jones Indus Actual(0DJIA) has risen 2.6%.
On the trade front, a joint statement following high-level China-U.S. economic and trade talks announced that both sides have agreed to substantially lower bilateral tariffs. The U.S. will roll back a total of 91% of the additional tariffs on Chinese goods and implement reciprocal tariff adjustments on another 34%, including a 90-day suspension for 24% of those tariffs, while retaining the remaining 10%. Additionally, the U.S. will reduce the ad valorem tax rate on small parcels from China from 120% to 54%, and cancel the planned increase in specific duties from $100 to $200 per item that was originally scheduled for June 1. In response, China will cancel 91% of its retaliatory tariffs, suspend the implementation of 24%, and pause or remove non-tariff countermeasures against the U.S.
On the macroeconomic front, data from the U.S. Bureau of Labor Statistics shows that the unadjusted Consumer Price Index (CPI) rose 2.3% y/y in April, marking the third consecutive month of weaker-than-expected inflation and the lowest level since February 2021. Core CPI rose at the same pace as the previous month, in line with expectations. The Producer Price Index (PPI) fell 0.5% month over month in April, the steepest monthly decline in five years and below both market expectations and the prior reading. Core PPI also declined 0.4% month over month, similarly undershooting forecasts. The unexpected drop in PPI was mainly due to falling profit margins, suggesting that companies are absorbing part of the tariff-related costs rather than fully passing them on to consumers. Notably, service prices fell 0.7%, the largest single-month decline since 2009. Retail sales rose just 0.1% month over month, a sharp slowdown from the strong 1.7% growth in March. Manufacturing output declined 0.4% month over month, marking its first drop in six months. On a y/y basis, April PPI rose 2.4%, exceeding expectations and the previous reading, while core PPI rose 3.1%, in line with forecasts but slightly below the prior month.
Separately, data from the U.S. Department of Commerce showed that April retail sales edged up 0.1% month over month, better than expected. March figures were significantly revised up to a 1.7% m/m gain. After revisions, retail sales were up 5.2% y/y, close to the highest level since December 2023. However, the near-flat growth in April suggests that consumers have begun to scale back spending in the face of rising prices and renewed concerns over tariffs.
On interest rates, President Trump seized on the softer-than-expected inflation data to again pressure Federal Reserve Chair Jerome Powell to cut rates promptly. Traders continue to bet on the Fed’s first rate cut in September, followed by a second one in October. According to the CME FedWatch Tool, as of May 15, 2025, markets are pricing in a 91.8% chance that the Fed will leave rates unchanged in June, a 35.9% chance of a 25-basis-point cut in July, and a 61.4% chance of no change in July.
On the employment front, data from the U.S. Department of Labor shows that initial jobless claims for the week ending May 10 were 229,000, matching expectations and unchanged from the previous week. Continuing claims for the week ending May 3 rose by 9,000 to 1.881 million.
In the A-share market, the CSI 300(000300) rose 1.1% this week, showing a pattern of early gains followed by a pullback. The weekly candlestick chart closed with a long upper shadow, with the index finding short-term support near its 100-day moving average. In terms of turnover, trading volume showed a slight improvement compared to the previous week, but remained below the 50-day average on most trading days, with only Wednesday’s volume slightly exceeding that level. The market is currently in a tentative rebound phase, technically supported by the 100-day moving average, while the 4,000-point psychological level is acting as an overhead resistance.
On the trade front, a joint statement following high-level China-U.S. economic and trade talks revealed a mutual agreement to substantially reduce bilateral tariffs. The U.S. will cancel 91% of its additional tariffs, and China will cancel an equivalent proportion of retaliatory tariffs. Both sides will also suspend 24% of their respective tariff measures, and China will pause or cancel certain non-tariff retaliatory actions against the U.S. A mechanism will be established for continued consultations on trade relations, with further working-level discussions to be conducted as needed. Additionally, a spokesperson from China’s Ministry of Commerce announced that, in line with the outcomes of the talks, China will suspend, for 90 days starting May 14, the addition of 28 U.S. entities to its export control list and pause the implementation of unreliable entity list measures on 17 U.S. firms for the same period.
On the macroeconomic side, data from the National Bureau of Statistics shows that China’s Consumer Price Index (CPI) rose 0.1% m/m in April, reversing a 0.4% decline from the previous month. On a y/y basis, CPI declined 0.1%, unchanged from March. Core CPI rose 0.2% m/m, up from flat growth previously, and increased 0.5% y/y, maintaining stable momentum. The Producer Price Index (PPI) fell 0.4% m/m, matching March’s decline, and dropped 2.7% y/y, with the decline widening by 0.2 percentage points from the previous month.
Regarding trade, data from the General Administration of Customs shows that China’s total imports and exports in April reached RMB 3.84 trillion, up 5.6% from a year earlier. Exports rose 9.3% to RMB 2.27 trillion, while imports increased 0.8% to RMB 1.57 trillion. Trade with the U.S. totaled RMB 326.92 billion for the month, with exports to the U.S. at RMB 236.8 billion and imports from the U.S. at RMB 90.11 billion.
In terms of credit and liquidity, People’s Bank of China (PBOC) data shows that by the end of April, total social financing stock rose 8.7% y/y, while M2 money supply grew 8%, with the pace of growth accelerating from March. In the first four months of the year, RMB-denominated loans increased by RMB 10.06 trillion, and total social financing grew by RMB 16.34 trillion. In April, the average interest rate for newly issued corporate loans was about 3.2%, around 4 basis points lower than in March, remaining near historic lows.
Elsewhere, the China Securities Regulatory Commission (CSRC) released an action plan to promote high-quality development of public mutual funds, requiring actively managed equity funds to adopt more flexible fee structures—particularly implementing punitive fee adjustments for funds that underperform their benchmarks. At the same time, seven government departments, including the Ministry of Science and Technology, jointly released a set of policy measures aimed at accelerating the development of a technology finance system that supports high-level self-reliance in science and technology. These measures include the establishment of a National Venture Capital Guidance Fund, preferential listing and financing support for tech firms that have achieved breakthroughs in key core technologies, the creation of a dedicated “Tech Board” in the bond market, and a pilot program allowing technology companies to conduct M&A loans with lending ratios raised to 80% of the transaction value and loan terms extended to 10 years.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 4.1% for this week. Our Hong Kong Model Portfolio rose by 1.5% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 776.6% vs. a 16.3% up for the Hang Seng.
The best performer in our Hong Kong 33 was CTIHK(06055), it’s China Tobacco’s exclusive international business platform. The stock gained 16.4% this week. EPS rating stands at 97, RS rating of 94, and A/D rating of A+.
Our Hong Kong Market Status are in a Rally Attempt.
From a technical perspective, the Hong Kong stock market experienced significant volatility this week, with the Hang Seng Index staging an early rally followed by a pullback—indicating some pressure for consolidation after the recent sharp gains. After a strong surge on Monday, the index failed to sustain upward momentum, reflecting a divergence in market views and a relatively balanced tug-of-war between bulls and bears.
In terms of trading volume, activity peaked on Monday but gradually declined over the rest of the week, suggesting a cooling in follow-through buying interest and a rising wait-and-see attitude among investors. The 50-DMA remains a key near-term support level, while the 24,000-point mark serves as the next major resistance.
As for the Southbound inflow via the HK-China Stock Connect, there was a total net outflow of HK$ 8.684 billion this week. Notably, Monday (May 12, 2025) saw a single-day net outflow of HK$ 18.528 billion, the largest since February 25, 2021. Despite the sharp rally driven by positive news, the net outflow suggests that domestic investors are maintaining a cautious stance on the market’s near-term trajectory.
Overall, market sentiment in Hong Kong turned from optimistic to cautious over the week, reflecting diverging views among investors on the market’s near-term direction. However, from a longer-term perspective, the easing of China-U.S. trade tensions and the stabilization of geopolitical conditions are expected to provide solid support for the Hong Kong market. Investors are advised to stay closely attuned to market developments and policy changes in order to formulate sound investment strategies.
At this stage, it remains important to stay calm and rational, avoid chasing short-term rallies blindly, and focus on fundamentally strong stocks with positive earnings surprises and resilient technical setups. A prudent and flexible approach is key to navigating ongoing 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 May 16, 2025