Hang Seng fell 1.5%
Editor’s Note: As always, we would appreciate any feedback you have. It will help us make this app more useful to you.
This week, the Hong Kong market came under pressure and fluctuated. Due to the Hong Kong Special Administrative Region Establishment Day holiday on Tuesday, the market was closed for one session. Over the remaining four trading days, the Hang Seng Index(HSI) fell 1.5%, while the Hang Seng Tech Index(HSTECH) declined 2.3%.
On Monday, the final trading day of the first half, institutional investors actively rotated positions, and weakness in the financial sector weighed heavily on the index. On Wednesday, the market staged a strong start to July, driven by favorable developments including domestic policy support for innovative drugs, overseas clinical progress, rising expectations for “anti-involution” policy measures, and anticipated supply-side reform in the solar sector.
However, sentiment weakened as the consumer sector broadly underperformed in the following sessions. Tech stocks saw mixed performance with a bias toward pullbacks, and weakness in heavyweight names further dragged on the broader market. Meanwhile, continued softness in traditional sectors contributed to the market’s overall decline.
In the U.S. stock market, the three major indexes continued their strong rebound. The S & P 500 Index(0S&P5) and the Nasdaq Composite(0NDQC) rose 1.7% and 1.6%, respectively, both setting new all-time highs. The Dow Jones Indus Actual(0DJIA) closed up 2.3%, leaving only 0.5% upside to its historical peak.
On the macro front, data from the U.S. Department of Commerce showed that in May, the PCE Price Index increased 2.3% y/y, in line with expectations but higher than the prior reading; on a monthly basis, it rose 0.1%, matching both expectations and the prior figure. Core PCE increased 2.68% y/y, exceeding both expectations and the previous print; on a monthly basis, it rose 0.2%, slightly above consensus and the prior reading. Personal consumption expenditures for the month fell 0.3% m/m, marking the largest decline since the beginning of the year, while personal income posted the biggest drop since 2021, mainly due to a reduction in government transfer payments. Factory orders in May surged 8.2% m/m, the largest increase since 2014, meeting expectations and improving on the prior figure; excluding defense, factory orders rose 7.5% m/m, also better than the prior reading. The trade deficit widened 18.7% m/m in May to $71.5 billion, with imports down 0.1% to $350.5 billion and exports declining 4% to $279 billion. ISM data showed the June Manufacturing PMI at 49, slightly above expectations and the prior figure but remaining in contraction territory for the fourth consecutive month; the Non-Manufacturing PMI came in at 50.8, marginally exceeding expectations and the prior reading.
In the labor market, the U.S. Bureau of Labor Statistics reported that May JOLTS job openings stood at 7.769 million, above expectations and the prior figure, reaching the highest level since November last year. Nonfarm payrolls increased by 147,000 in June, beating forecasts, while April and May figures were revised up by a combined 16,000. The unemployment rate unexpectedly fell to 4.1%, below consensus. For the week ended June 28, initial jobless claims totaled 233,000, the lowest in six weeks; continuing claims for the week ended June 21 rose to 1.964 million, the highest since November 20, 2021. According to ADP Research, ADP private payrolls unexpectedly declined by 33,000 in June, marking the first negative growth since March 2023 and falling far short of expectations; May data was revised down to a gain of only 29,000.
On the monetary policy front, Fed Chair Jerome Powell stated that if not for the tariff policies under the Trump administration, current monetary policy would have been more accommodative. When asked about the possibility of a rate cut in July, he emphasized that “no options are ruled out—everything depends on the data.” Following the release of employment data, the market has abandoned bets on a July rate cut, and expectations for a September cut have also cooled. According to the CME FedWatch Tool, as of July 3, the probability of rates remaining unchanged in July had risen to 94.8% from 79.3% a week earlier; the probability of a 25 bps cut in September had dropped to 63.8% from 74.3%.
In the A-share market, the CSI 300(000300) posted gains for five consecutive sessions this week, with a cumulative increase of 1.5%. Trading volume edged down slightly compared to last week, but except for Tuesday, when volume was marginally below the 50-DMA, the other four trading days all maintained turnover above the 50-day moving average. The market remains in a rally attempt phase, with the 100-DMA serving as an important technical support, while overhead resistance comes from the March 19 high at 4,025.3, which acts as a key intermediate barrier.
On the macro front, data from the National Bureau of Statistics showed that in June, the Manufacturing PMI stood at 49.7%, up 0.2 percentage point m/m, indicating continued improvement in manufacturing sector sentiment. The Non-Manufacturing PMI came in at 50.5%, rising 0.2 percentage point m/m and remaining in expansion territory. The Composite PMI reached 50.7%, an increase of 0.3 percentage point m/m, suggesting that overall production and business activities in Chinese enterprises continued to accelerate. Meanwhile, Caixin data showed that the Caixin China Manufacturing PMI climbed to 50.4 in June, up 2.1 percentage points from May and matching the April reading, returning to expansion territory. The Caixin China Services PMI declined to 50.6, down 0.5 percentage point from May, marking the lowest level in expansion territory since Q4 2024. The Caixin China Composite PMI rebounded by 1.7 percentage points to 51.3, also back in expansion, indicating that overall business activity resumed growth. According to the Ministry of Commerce, China’s total imports and exports of services reached RMB 3,254.36 billion in the January–May period, up 7.7% y/y, with exports rising 15.1% y/y to RMB 1,403.37 billion and imports growing 2.7% y/y to RMB 1,850.99 billion.
On the policy front, recent measures have focused on “eliminating involution-type competition” and accelerating the development of a unified national market. The sixth meeting of the Central Financial and Economic Affairs Commission set out the “Five Unifications and One Openness” implementation roadmap, calling for rectification of disorderly price-cutting competition among enterprises, guiding the orderly exit of outdated capacity in steel, photovoltaic, and cement industries, and regulating local governments’ investment promotion activities to curb protectionist tendencies. In addition, the Ministry of Finance, the State Taxation Administration, and the Ministry of Commerce jointly issued an announcement clarifying that between January 1, 2025, and December 31, 2028, eligible foreign investors who reinvest profits distributed by resident enterprises in China for direct domestic investment may offset 10% of the investment amount against their annual tax payable. The State Administration of Foreign Exchange recently granted a combined quota of USD 3.08 billion to certain qualified domestic institutional investors (QDII) to further support compliant cross-border investment activities by QDII institutions.
Leading stocks failed this week. The average stock in the MarketSmith Hong Kong 33 rose by 2.8% for this week. Our Hong Kong Model Portfolio fell by 1.3% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 864.4% vs. a 19.2% up for the Hang Seng.
The best performer in our Hong Kong 33 was DREAM INT’L(01126), it’s an investment holding company mainly engaged in the plush toy business. The stock gained 17.1% this week. EPS rating stands at 76, RS rating of 95, and A/D rating of A.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, after a strong performance on the first trading day of July, the Hang Seng Index continued to pull back this week, falling below its 21-DMA and largely filling the upside gap from June 24, with the remaining portion of the gap still serving as short-term support. In terms of trading volume, although there were only four sessions this week, daily turnover consistently held above the 50-day average. On the technical support front, the 50-DMA remains an important near-term defense level, while the YTD high of 24,874.39 reached on March 19 represents a key overhead resistance.
On the flows side, the Southbound inflow via the HK-China Stock Connect maintained a net buying trend, with a cumulative net purchase of HKD13.892 billion this week, marking the seventh consecutive week of net inflows.
Overall, despite the market showing short-term consolidation and adjustment, sustained Southbound inflows have provided resilient support, and the medium-term recovery thesis remains intact. Policy focus continues to center on supply-side capacity reduction in the solar industry and the implementation of reimbursement policies supporting innovative drugs. Next week, close attention should be paid to the release of China’s June CPI data and the progress of trade negotiations ahead of the July 9 U.S. tariff discussion deadline.
At this stage, investors are advised to remain calm and rational, avoid chasing gains blindly, and prioritize stocks with earnings that exceed expectations and robust technical setups, adopting a prudent strategy to navigate market volatility flexibly.
What do you think? Please email us any questions or comments.
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 July 4, 2025