Hang Seng Index Down 0.41%
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The Hang Seng Index(HSI) declined by 0.41% this week, while the Hang Seng Tech Index(HSTECH) fell by 0.86%. Contrary to expectations of thin trading ahead of the holiday, both indices saw increased volume on the final trading day, with HSI and HSTECH turnover rising 12.32% and 9.81% above their respective 50-day average levels, indicating active investor participation and heightened market sentiment rather than holiday-related caution.
The pullback in Hong Kong equities was primarily driven by external macro headwinds and internal structural divergence. U.S. initial jobless claims for the week ending January 3 came in at 208,000—slightly below expectations—but combined with December ADP employment growth of only 41,000 and the ISM Manufacturing PMI contracting for the 10th consecutive month (at 47.9), market confidence in a U.S. “soft landing” has wavered. Meanwhile, the U.S. Dollar Index approached 99.0, hitting a four-week high, and offshore RMB briefly neared the 7.0 mark during the week, dampening risk appetite in Hong Kong markets.
However, the People’s Bank of China (PBOC) clearly signaled at its 2026 work conference that it would “continue implementing a moderately accommodative monetary policy,” emphasizing the “flexible and efficient use of various tools such as reserve requirement ratio cuts and interest rate reductions to maintain ample liquidity”—providing clear policy support. Additionally, China’s December CPI rose 0.8% year-over-year (the highest since March 2023), while the PPI decline narrowed to -1.9%, indicating mild domestic demand recovery and rising inflation expectations—positive for corporate earnings outlooks.
From a sector perspective, none of the top three O’Neil industry gainers this week appeared in local Hong Kong classifications. However, performance among HK33 constituents revealed strong thematic trends: INGDAN(00400) surged 25.91%, ranking #7 in its industry with an EPS Rating of 70 and year-over-year revenue growth of 54.5%, reflecting robust demand across electronic components and the AIoT supply chain. J&T EXPRESS-W(01519) gained 15.27%, benefiting from cross-border e-commerce momentum and expectations of domestic consumption recovery. CHINA SANJIANG(02198) rose 14.38%, with an industry rank of 12 and an EPS Rating of 84, signaling investor interest in basic materials.
U.S. major indices posted mixed results: the Dow Jones Indus Actual(0DJIA) rose 1.83%, the S & P 500 Index(0S&P5) gained 0.92%, and the Nasdaq Composite(0NDQC) edged up 1.05%. Although the Nasdaq ended a three-week winning streak, all three indices remain within 1% of their all-time highs, underscoring underlying market resilience.
U.S. market dynamics were shaped by multiple intersecting forces. On one hand, the Trump administration signaled aggressive fiscal expansion—including hints of significantly higher defense spending and plans to develop Venezuela’s oil resources—boosting defense and energy sectors. On the other, weak labor and manufacturing data reinforced expectations of Fed rate cuts in 2026, increasing Treasury yield volatility. Notably, while geopolitical risks (e.g., the reported arrest of Venezuelan President Maduro) briefly lifted safe-haven assets, their impact on U.S. equities was limited, as market focus remained on AI-driven narratives. Events such as xAI’s $20 billion Series E funding and Neuralink’s move into mass production continued to fuel capital enthusiasm for AI infrastructure—though warnings from figures like Ray Dalio that the AI rally may be in a “bubble’s early stage” triggered some profit-taking.
Mainland China’s A-share market delivered the strongest performance: the CSI 300(000300) jumped 2.79% for the week, with volume on the final day 31.1% above its 50-day average—indicating active inflows of incremental capital. The SSE Index recorded seven consecutive gains, led by semiconductors, commercial aerospace, and coal, while defensive sectors like precious metals pulled back.
The strength in A-shares stems from robust policy tailwinds and a clear industrial roadmap. The Central Commission for Financial and Economic Affairs designated “expanding domestic demand” as the top priority for 2026. Eight ministries, led by the Ministry of Industry and Information Technology (MIIT), jointly issued the “Implementation Guidelines for the ‘AI + Manufacturing’ Special Action” and the “Action Plan for Integrating Industrial Internet and Artificial Intelligence,” targeting the upgrade of at least 50,000 enterprises with next-generation industrial networks by 2028. Combined with improving December CPI/PPI data and the PBOC’s commitment to “ample liquidity,” these developments have fostered a “policy + earnings” double-boost narrative. Regulators also continue advancing capital market reforms—cracking down on financial fraud and encouraging long-term institutional investment—to strengthen institutional foundations. Sector-specific “anti-excessive competition” dialogues in photovoltaics and lithium batteries are further helping stabilize pricing expectations and improve profitability outlooks.
This week, the HK33 portfolio gained 4.74% on average, with 26 stocks rising and 7 declining—significantly outperforming the HSI. Top performer INGDAN(00400) surged 25.91%, exemplifying classic O’Neil selection criteria through its high industry rank (#7) and strong revenue growth (+54.5%). The Model Portfolio delivered even stronger results, averaging a 6.59% gain with all four holdings advancing: CMOC(03993) rose 7.44%, boasting an industry rank of #1, an EPS Rating of 98, and an ROE of 25.97%; HANSOH PHARMA(03692) gained 14.16% with an EPS Rating of 95—demonstrating sustained investor preference for high-quality earnings.
Technically, the HSI currently trades above its 10-day (+0.44%), 20-day (+1.41%), and 50-day (+0.88%) moving averages, suggesting short-term consolidation. Key support lies at the psychological 26,000 level, with resistance near the prior high of 27,381.84. The HSTECH also holds above its 10-day (+0.69%) and 20-day (+2.0%) moving averages, but persistently low volume constrains upside potential; a breakout above 5,800 with strong volume would be needed to confirm a new uptrend.
Southbound capital flows recorded a net inflow of HK$32.694 billion this week, continuing the steady trend since mid-2025. Mainland investors continue favoring high-dividend assets (e.g., state-owned banks), platform economy leaders, and hard-tech names aligned with domestic substitution logic—providing a solid funding floor for Hong Kong markets.
In summary, global markets at the start of the year show a clear pattern: “A-shares leading, U.S. equities consolidating near highs, and Hong Kong equities building base.” A-shares benefit from explicit “new quality productive forces” policy direction and loose liquidity; Hong Kong markets display resilience under southbound support; and U.S. equities maintain strength amid the tug-of-war between AI narratives and economic data. Looking ahead, as China enters the opening year of its “Fifteenth Five-Year Plan” with ongoing policy dividends—and as markets navigate shifting Fed rate-cut expectations—high-quality individual stocks are well-positioned to stand out amid volatility.
At this stage, investors are advised to remain calm and rational, avoid chasing rallies blindly, and prioritize stocks with earnings surprises and sound technical structures—adopting a disciplined strategy to navigate market fluctuations.
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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 January 9, 2026