Hang Seng Up 0.5%
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Due to New Year’s Day holiday arrangements, next week’s weekly report will be suspended for one week. As we approach the 2026 New Year, we extend our early wishes for a prosperous new journey, grand achievements, and continued success!
The Hang Seng Index(HSI) rose modestly by 0.5% this week, while the Hang Seng TECH Index(HSTECH) gained 0.37%. Market activity was notably thin: on the final trading day, HSI and HSTECH volumes were down 58.73% and 61.48%, respectively, compared to their 50-day average—reflecting strong pre-holiday caution.
The mild rebound in Hong Kong equities was primarily driven by marginal improvements in the external macro environment. Initial jobless claims in the U.S. for the week ending December 22 came in at 214,000, below the expected 224,000, signaling continued labor market resilience. Meanwhile, offshore RMB broke through the 7.0 mark intraday on December 25, reaching as high as 6.9985—the first time in 15 months—enhancing the appeal of Hong Kong-listed assets. Additionally, the People’s Bank of China conducted a CNY 400 billion Medium-term Lending Facility (MLF) operation on December 24, marking the 10th consecutive month of expanded rollovers, injecting medium- to long-term liquidity and supporting market risk appetite. However, heightened global bond market volatility following the Bank of Japan’s rate hike, combined with subdued trading during the Christmas holiday, capped upside potential for Hong Kong stocks.
From a policy perspective, the Hong Kong SAR government is systematically refining capital market regulations to bolster international competitiveness. The Hong Kong Exchanges and Clearing (HKEX) recently announced plans to simplify board lot sizes, reducing over 40 existing lot configurations to just eight standardized tiers (ranging from 1 to 10,000 shares), with upper and lower limits set on per-lot market value. This move is expected to lower barriers for retail investors and improve liquidity for small- and mid-cap stocks—particularly benefiting high-quality growth companies with strong O’Neil industry rankings but currently thin trading volumes.
At the same time, Hong Kong’s status as the world’s largest offshore RMB hub continues to strengthen. On December 22, the PBOC issued CNY 40 billion of six-month central bank bills in Hong Kong. Together with net MLF injections and RMB exchange rate stabilization, this has created a “triple support” framework encompassing liquidity, exchange rates, and institutional reforms. Notably, the Catalogue of Industries Encouraging Foreign Investment (2025 Edition) explicitly supports foreign capital flowing into advanced manufacturing and modern services. With its common law system, free capital movement, and market connectivity mechanisms with mainland China, Hong Kong is well-positioned to serve as a key gateway for foreign investors seeking exposure to China’s “hard tech” assets.
According to the latest O’Neil industry data, the top three best-performing sectors this week were:
- Bldg-Wood Prds(G2400IG.HK): +17.86%
- Bldg-Maintenance & Svc(G7340IG.HK): +14.85%
- Elec-Semiconductor Mfg(G3677IG.HK): +7.06%
The strong rebound in property-related sectors was clearly boosted by policy spillover effects, as markets anticipate that mainland China’s “precision easing” in real estate policy will extend to the completion phase and building materials supply chain. Meanwhile, the robust performance in tech aligns with recent price hikes announced by SMIC and Samsung, as well as NVIDIA’s plan to export H200 chips to China in 2026—demonstrating sustained institutional recognition of the “hard tech” investment theme.
All three major U.S. indices closed higher this week, extending the “Santa Claus rally”:
- Dow Jones Indus Actual(0DJIA): +1.24%
- S & P 500 Index(0S&P5): +1.43% (just 0.076% below its all-time high)
- Nasdaq Composite(0NDQC): +1.31%
The rally was fueled by a confluence of strong economic data and dovish policy expectations. U.S. Q3 GDP annualized growth reached 4.3%—a two-year high—bolstering the “soft landing” narrative. Core CPI also cooled to 2.6%, reinforcing expectations for rate cuts in 2026. Fed Governor Christopher Waller recently stated that “rates could fall substantially,” while former President Trump noted that the next Fed chair would favor an accommodative stance. Markets are now pricing in approximately three more rate cuts in 2026. Furthermore, retail investor inflows remain robust—over USD 307 billion flowed into U.S. equities in 2025, a record high—further heating up market sentiment.
On the policy front, U.S. fiscal and monetary policies reflect a “expansionary fiscal + expected monetary easing” mix. Although the Fed has not officially pivoted to cutting rates, its December meeting minutes signaled acknowledgment of cooling inflation, and several FOMC members have publicly endorsed launching a rate-cut cycle in 2026. Meanwhile, the Trump administration is reportedly preparing a new round of large-scale tax cuts and infrastructure spending. If enacted before the 2026 election, this could further widen the fiscal deficit but may also stimulate short-term growth.
Notably, U.S. technology restrictions on China continue to intensify—including AI chip export controls and enhanced audit scrutiny of Chinese ADRs. While these measures offer short-term tailwinds for domestic tech giants, they risk deepening global supply chain fragmentation and undermining multinational earnings stability over the long term. However, the November unemployment rate rose to 4.6%, suggesting growth momentum may be peaking. Combined with renewed geopolitical risks—Iran rebuilding missile stockpiles and stalled Russia-Ukraine peace talks—this elevates volatility risks for U.S. equities at elevated levels.
The A-share market showed the strongest performance globally: theCSI 300(000300) rose 1.95% this week. Although trading volume on the most recent day was 9% below its 50-day average, structural activity remained pronounced.
A-share strength stems from synchronized policy implementation and industrial trends. The Central Commission for Financial and Economic Affairs designated “expanding domestic demand” as the top priority for 2026. Eight ministries, including the Ministry of Commerce, unveiled 21 financial measures to support the Western Land-Sea New Passage. On December 25, Beijing relaxed social security requirements for non-residents purchasing homes and allowed multi-child families to buy additional properties—marking a shift toward “precision easing” in housing policy.
Meanwhile, the Catalogue of Industries Encouraging Foreign Investment (2025 Edition) focuses on advanced manufacturing and modern services, boosting foreign investor confidence. At the industry level, LandSpace completed its IPO tutoring, China issued its first L3 autonomous driving license plate, and SMIC announced price increases—highlighting accelerated commercialization across the “Four Pillars of Hard Tech”: AI, semiconductors, commercial aerospace, and intelligent driving. However, Vanke’s bond extension proposal was again rejected, underscoring that property sector credit risks are still being resolved.
This week, the HK33 portfolio gained an average of 0.91%, with 22 stocks rising and 11 declining. The top three gainers were:
- APAC RESOURCES(01104): +9.74% (RS Rating: 93; Industry Rank: 153)—driven by idiosyncratic strength
- CHINAGOLDINTL(02099): +6.79% (Industry Rank: 2; EPS Rating: 89; YoY revenue growth: +35.53%)
- TIME INTERCON(01729): +6.69% (Industry Rank: 22; EPS Rating: 98; YoY revenue surge: +82.05%)
The model portfolio rose 0.876% on average, led by ZIJIN MINING(02899) (+4.7%, EPS Rating: 99) and CMOC(03993) (Industry Rank: 2), reflecting a strategic focus on high earnings quality and leading sectors.
From a technical perspective, the HSI currently trades above its 5-day (+0.40%), 10-day (+0.69%), and 20-day (+0.29%) moving averages, though slightly below the 50-day MA (-0.55%), indicating a mildly bullish consolidation pattern in the near term. Key support lies at 25,500, with resistance at 26,000. The HSTECH has reclaimed its 5-day (+0.31%) and 10-day (+0.09%) MAs but remains below both the 50-day (-4.06%) and 200-day (-1.43%) MAs. A confirmed trend reversal would require a breakout above 5,600 on significantly higher volume.
Southbound capital recorded net inflows this week, continuing last week’s trend. Despite a minor net outflow of HKD 1.175 billion on December 24, buying dominated overall, with concentrated purchases in semiconductors, gold, and high-dividend state-owned enterprises—reflecting mainland investors’ willingness to accumulate quality Hong Kong assets on dips.
In summary, global markets ended the year in a divergent pattern: U.S. equities consolidating at highs, A-shares showing structural strength, and Hong Kong equities staging a mild recovery. Hong Kong benefits from RMB appreciation, ample liquidity, and hard-tech tailwinds—but remains constrained by light trading and external volatility. Looking ahead to 2026, as “expanding domestic demand + strengthening hard tech” policies deepen and the Fed’s easing cycle begins, valuation recovery room in Hong Kong equities could meaningfully expand.
For now, investors are advised to remain calm and rational, avoid chasing rallies, and prioritize stocks with earnings beats and solid technical setups—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 December 26, 2025