Hang Seng fell 8.5%
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This week, the Hang Seng Index tumbled 8.5%, while the Hang Seng Tech Index fell 7.8%. At the start of the week, a tariff hike announced by the Trump administration sharply escalated global trade tensions, intensifying fears of a breakdown in global supply chains. This triggered a broad sell-off across global markets and weighed heavily on Hong Kong stocks. On Monday, the Hang Seng Index plunged 13.2% in a single day, marking the largest one-day drop in its history. In the second half of the week, Trump announced a 90-day suspension of new tariffs on certain countries. Coupled with U.S. core CPI for March coming in below expectations year over year, this strengthened market expectations for Fed rate cuts and brought about a brief improvement in sentiment. At the same time, supportive policies at the national level began to take effect. Southbound inflows via the Stock Connect continued to provide liquidity despite the broader sell-off, while a wave of share buyback announcements and insider purchases from listed companies further boosted market confidence. Under the combined effect of these factors, the Hang Seng Index rebounded for four consecutive sessions. Nonetheless, due to the earlier deep correction, the index still ended the week with a significant loss.
In the U.S. stock market, as of this Thursday, the S&P 500 Index had gained 3.8%, the Nasdaq Index was up 5.1%, and the Dow Jones Index rose 3.3%. On the macro front, data from the U.S. Bureau of Labor Statistics showed that the U.S. CPI rose 2.4% year over year in March, marking the lowest level in seven months. The figure was slightly below expectations and showed a notable decline from the previous reading. On a month-over-month basis, CPI declined by 0.1%, coming in lower than expected. This was the first negative reading since May 2020 and the lowest since June 2024. Core CPI rose 2.8% year over year in March, with the increase narrowing for the second consecutive month, reaching the lowest level since March 2021. It was also below both the expected and previous readings. Core CPI declined 0.1% month over month, the largest drop since June 2024, and below expectations. In addition, the super core CPI (excluding housing services) fell 0.1% month over month and rose 3.22% year over year, the lowest level since December 2021. On tariffs, former U.S. President Trump announced a 90-day postponement in implementing “reciprocal tariffs” for most countries, maintaining a base tariff rate of 10%. Tariffs on Chinese goods, however, underwent multiple adjustments: after an initial 34% increase, another 50% was added, bringing the cumulative tariff rate to 104%. The latest Federal Reserve meeting minutes showed that policymakers generally believed the economic outlook remained highly uncertain and that inflation faced upside risks. They emphasized that the Fed was fully capable of waiting until there was greater clarity on inflation and economic trends before taking action. Some members noted that if inflation persisted while growth momentum weakened, the Fed could face a “difficult trade-off.” Nearly all members supported the previous decision to slow the pace of balance sheet reduction, but most believed there was insufficient basis at this meeting to justify a further slowdown. In terms of employment, data from the U.S. Bureau of Labor Statistics showed that nonfarm payrolls increased by 228,000 in March, higher than both expectations and the previous figure. The prior reading was revised down to 117,000, and January’s data was also revised down to 114,000. The unemployment rate rose to 4.2% in March, higher than both the expected and previous figures. According to the latest data, initial jobless claims for the week ending April 5 came in at 223,000, higher than the previous figure but in line with expectations. Continuing claims for the week ending March 29 stood at 1.85 million, showing some improvement from the prior week.
In the A-share market, the CSI 300 Index declined 2.9% this week. The decline was mainly triggered by a global market selloff on Monday due to tariff concerns, with A-shares also coming under pressure. Although the following four trading sessions all ended in positive territory, trading volume shrank each day, with Friday’s volume falling below the 50-day average. The market is currently in a Rally Attempt phase, with the 200-DMA providing short-term support and the 100-DMA acting as overhead resistance on the technical front. On the macro side, data from the National Bureau of Statistics showed that China’s CPI declined 0.4% month over month in March, while the year-over-year decline narrowed to 0.1%. The PPI dropped 0.4% m/m and 2.5% y/y. The Producer Purchase Price Index also weakened, down 0.2% m/m and 2.4% y/y. The current deflationary pressure primarily stems from seasonal factors and imported effects from international commodity prices. Marginal analysis suggests that the effects of consumption stimulus policies are gradually emerging, with core CPI turning positive to 0.5% y/y, indicating early signs of improvement in the supply-demand structure. Regarding the tariff dispute, in response to the U.S. tariff hikes on Chinese goods, the Customs Tariff Commission of the State Council imposed reciprocal countermeasures, raising the tariff rate to 84% to match the latest U.S. rate. Simultaneously, the Ministry of Commerce launched three coordinated actions: initiating a dispute settlement procedure under the WTO framework, adding six U.S. firms including Shield AI to the Unreliable Entity List, and imposing export restrictions on 12 U.S. entities. In addition, export controls on key strategic resources such as medium and heavy rare earths were tightened. In terms of foreign exchange and gold reserves, data from the State Administration of Foreign Exchange showed that as of the end of March, China’s gold reserves stood at 73.7 million ounces, up 0.15% from the previous month, marking the fifth consecutive month of accumulation. Foreign exchange reserves totaled USD 3.2407 trillion, up 0.42% m/m. On the capital front, Central Huijin reiterated its confidence in the long-term development of China’s capital markets. The company affirmed the valuation advantage of A-shares and disclosed that it had further increased its holdings of exchange-traded funds (ETFs), pledging to continue buying in the future to help stabilize market expectations. Other state-owned capital platforms such as China Chengtong and China Reform Holdings also voiced strong support for market stabilization, stating their commitment to safeguarding orderly market operations.
Leading stocks fall this week. The average stock in the MarketSmith Hong Kong 33 fell by 5.0% 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 685.7% vs. a 4.2% up for the Hang Seng.
The best performer in our Hong Kong 33 was ZHAOJIN MINING(01818), it’s a leading integrated gold enterprises in China. The stock gained 12.0% this week. EPS rating stands at 92, RS rating of 85, and A/D rating of B.
Our Hong Kong Market Status are in a Rally Attempt.
From a technical perspective, Monday’s sharp sell-off caused the Hang Seng Index to break below the key support of its 200-DMA. Fortunately, boosted by a confluence of positive catalysts, the index staged a recovery and ultimately reclaimed this critical technical level. The market trend has shifted from a prior downtrend to a rally attempt, with the current support at the 200-DMA and resistance at the 100-DMA. In terms of volume, total turnover expanded significantly compared to recent weeks but showed a declining trend throughout the week, tapering off by Friday to below the 50-DMA, reflecting lingering uncertainty over future developments. As for capital flows, The Southbound inflow via the HK-China Stock Connect recorded a net inflow of HK$82.254 billion for the week—marking the second-largest weekly net inflow on record. Overall, the future trajectory of the Hong Kong market will depend on the strength of domestic policy support, changes in the Trump administration’s tariff stance, and the timing of greater clarity on the Fed’s rate-cut path. While current attractive valuations and persistent Southbound inflows offer some support, investors should remain cautious of external liquidity swings and renewed tariff tensions. Should rate cuts materialize alongside the release of policy dividends, the market may see a structural recovery. At this stage, investors are advised to stay calm and rational, avoid blindly chasing rebounds, and instead focus on stocks with earnings that beat expectations and solid technical setups—adopting a prudent and flexible approach to navigate market volatility.
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published on April 11, 2025