Hang Seng Index Falls 3.28%
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The Hang Seng Index(HSI) declined 3.28% this week, while the Hang Seng TECH Index(HSTECH) performed even worse, falling by 3.70%. The Hong Kong equity market faced persistent pressure throughout the week, primarily due to multiple external shocks: heightened geopolitical tensions in the Middle East dampening global risk appetite, surging oil prices fueling inflation expectations, and renewed uncertainty over the Federal Reserve’s rate-cut outlook. Although HSI trading volume on the final day rose +14.47% above its 50-day average—indicating active market participation—the inflows largely reflected defensive portfolio rebalancing rather than aggressive buying.
Hong Kong’s weak performance this week was closely tied to a sharp deterioration in the global macro environment. The Middle East conflict continued to escalate, with Iran claiming it struck the U.S. Navy’s USS Abraham Lincoln aircraft carrier and threatening to blockade the Strait of Hormuz. This sent WTI crude prices soaring by as much as 8%, breaching USD 82 per barrel—the highest level since July 2024. The resulting volatility in energy prices intensified market concerns about a resurgence of U.S. inflation. Richmond Fed President Barkin explicitly stated that if war-related disruptions become prolonged, the Fed would be compelled to respond with policy measures. Consequently, market expectations for Fed rate cuts in 2026 have significantly cooled, and the yield on the 10-year U.S. Treasury note has risen for four consecutive trading days. As an offshore market highly sensitive to global liquidity conditions, Hong Kong bore the brunt of these developments. Meanwhile, U.S. domestic data remained mixed: February ADP employment added 63,000 jobs—exceeding expectations—but strong labor data in the current context reinforced the “higher for longer” interest rate narrative, further pressuring growth stock valuations. Additionally, the Trump administration’s plan to impose a 15% tariff on global goods under the Trade Act of 1974—though challenged in a joint lawsuit by 24 states—has reignited trade friction risks, weighing on market sentiment.
From a domestic economic and policy perspective, the Hong Kong market stands at a critical juncture. On one hand, China’s National “Two Sessions” delivered strong signals for stabilizing growth. The Government Work Report not only set a GDP growth target of 4.5%–5%, but also unveiled an aggressive fiscal package—including RMB 1.3 trillion in ultra-long special treasury bonds and RMB 4.4 trillion in local government special-purpose bonds—and reaffirmed a commitment to “continue implementing a moderately accommodative monetary policy.” A spokesperson for the National People’s Congress further stated that “the central government will introduce more pro-Hong Kong policies” to reinforce Hong Kong’s status as an international financial center. These measures provide a solid policy floor for the Hong Kong market. On the other hand, the pace of mainland China’s economic recovery remains the key variable. The official Manufacturing PMI came in at 52.4 in February—slightly below expectations but marking the second consecutive month in expansion territory—with high-tech manufacturing showing sustained momentum, offering long-term support to Hong Kong’s new economy sectors. However, in the short term, the intensity of external shocks has far outweighed the stabilizing effect of domestic policy, temporarily undermining market confidence.
At the sector level, the market exhibited extreme risk-off and defensive behavior. Energy stocks emerged as one of the few bright spots, benefiting from the oil price surge. In the Oil&Gas-Integrated(G1317IG.HK) sector, PETROCHINA(00857) gained 9.01% for the week, with an RS Rating of 84 and an O’Neil Score of 68. Fellow energy names CHINA COAL(01898) (industry rank 45) and CNOOC(00883) (industry rank 16) rose 5.23% and 5.13%, respectively. In stark contrast, high-valuation growth sectors—particularly biotech and select consumer tech stocks—faced heavy selling. WUXI BIO(02269), a holding in the model portfolio, plunged 9.65% for the week, reflecting rapid capital withdrawal from areas perceived as highly uncertain.
U.S. markets also experienced significant turbulence this week, with major indices diverging sharply. The Dow Jones Indus Actual(0DJIA) tumbled 2.09%, the S & P 500 Index(0S&P5) fell 0.70%, while theNasdaq Composite(0NDQC) edged up modestly by 0.36%.
This divergence highlights the market’s selective approach amid volatility: AI hardware leaders like NVIDIA demonstrated remarkable resilience, staging a V-shaped intraweek reversal to close higher and prop up the Nasdaq. In contrast, economically sensitive industrial and financial stocks dragged the Dow sharply lower. Geopolitical tensions in the Middle East remained the core driver of market swings. At the outset of the conflict, panic spread rapidly, sending the Dow plunging more than 1,100 points intraday. Sentiment later stabilized somewhat as the U.S. government signaled plans to escort oil tankers and former President Trump claimed he would resolve the oil price issue. Nevertheless, fundamental concerns persist: prolonged conflict could reignite inflation via energy channels, forcing the Fed to delay or even cancel rate cuts—a tangible headwind for an already richly valued U.S. equity market.
The A-share market was also unable to escape the turmoil. TheCSI 300(000300) declined 1.07% for the week, with trading volume on the final day contracting by 5.36% relative to its 50-day average, signaling strong caution among incremental investors.
Despite supportive domestic policy tailwinds—the Government Work Report setting a 4.5%–5% GDP growth target, targeting a fiscal deficit ratio of around 4%, and emphasizing “moderately accommodative” monetary policy—the impact of external shocks proved more immediate. Volatility in global commodity prices driven by Middle East tensions—especially rising energy and certain metal prices—has sparked concerns about imported inflation, potentially constraining room for domestic monetary easing. That said, structural opportunities in the A-share market remain. In the latter part of the week, as sentiment stabilized, policy-aligned sectors such as Micro LED and smart grids—consistent with the “new quality productive forces” framework—led the rebound, demonstrating domestic investors’ firm conviction in the industrial policy theme.
The Top 33 portfolio underperformed this week, declining by an average of 3.95% (8 stocks up, 25 down), with PETROCHINA(00857) leading gains at +9.01%. The Model Portfolio suffered heavier losses, plunging 9.34% on average, with all holdings in the red; CMOC(03993) and Minth Group(00425) both dropped more than 11%. This illustrates that even carefully curated portfolios are vulnerable under systemic stress—but the Top 33, thanks to its focus on high industry strength and solid fundamentals, showed notably better downside resilience than both the Model Portfolio and the HSI.
Technically, the HSI has broken below both its 50-day moving average (-2.9098%) and 20-day moving average (-2.82%), barely holding above the 200-day moving average by just +0.6783%. The medium-term uptrend has been disrupted, and the index has entered a short-term consolidation phase. Key support has shifted down to the psychological 25,000-point level; a breach could trigger further declines toward the 24,500 zone. Resistance lies near 26,500. The HSTECH exhibits even weaker technicals—not only trading well below all short-term moving averages but also sitting 11.9745% below its 200-day moving average—placing it firmly in bear market territory with a longer road to recovery.
Southbound capital flows turned cautious this week, recording a net outflow of HK$8.094 billion. This marks a sharp reversal from the prior week’s inflows, indicating that mainland investors adopted a defensive stance in response to sudden overseas geopolitical risks, actively reducing their Hong Kong equity exposure and shifting from aggressive positioning to wait-and-see and partial profit-taking.
In summary, global markets this week were dominated by Middle East geopolitical tensions, placing broad pressure on risk assets. Hong Kong, due to its unique offshore nature and high sensitivity to shifts in global liquidity and risk sentiment, led the declines. Although A-shares benefited from strong domestic policy support, they still retreated under external spillovers. U.S. equities showed some resilience, buoyed by AI leaders, but face undeniable valuation pressures. Looking ahead, market focus will center on the duration and intensity of the conflict and its real-world impact on global energy supply and inflation trajectories. If signs of de-escalation emerge, risk appetite may recover; conversely, prolonged conflict could keep global markets under sustained pressure. Investing involves risks—please proceed with caution.
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published on March 6, 2026