Hang Seng Index Falls 0.74%
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The Hang Seng Index(HSI) declined 0.74% this week, while the Hang Seng TECH Index(HSTECH) underperformed further, dropping 2.06%. The Hong Kong equity market as a whole exhibited a pattern of high-level volatility and structural divergence.
Market swings throughout the week were primarily driven by external macro factors, including recurring geopolitical tensions in the Middle East, rising global inflation expectations, and the Federal Reserve’s continued hawkish stance. Although HSI trading volume on the final day surged 24.70% above its 50-day average—indicating heightened market activity—the inconsistent flow of southbound capital highlighted investors’ cautious balancing act between risk and opportunity.
Hong Kong equities remained highly correlated with the global macro environment this week. U.S. initial jobless claims for the week ending March 14 fell to 205,000, the lowest level this year, underscoring a still-tight labor market. Combined with February’s stronger-than-expected U.S. PPI data, concerns about persistent inflation intensified. Against this backdrop, while the Fed held rates steady at 3.75% in its March meeting, it raised its inflation forecast and signaled only one rate cut in 2026. This “higher for longer” interest rate outlook pushed U.S. Treasury yields higher and strengthened the dollar, exerting pressure on global risk assets—including Hong Kong equities. Ongoing Middle East conflict kept oil markets tense; despite coordinated releases of strategic reserves by multiple countries, Brent crude briefly approached USD 110/barrel, amplifying fears of “stagflation.” As an offshore market, Hong Kong is highly sensitive to shifts in global liquidity, contributing to downward pressure. Nevertheless, supportive signals from China’s domestic policy front—particularly the central bank’s emphasis on “firmly safeguarding stable financial market operations”—provided crucial internal support.
Sector-wise, market leadership rotated toward defensive and high-certainty themes. Benefiting from global supply chain restructuring and surging AI computing demand, SITC(01308) and OOIL(00316) rose 3.38% and 2.94%, respectively, highlighting the strategic value of shipping amid geopolitical risks. The healthcare sector also showed independent strength: MODERN DENTAL(03600) led gains with a 9.27% weekly increase, supported by an exceptionally high EPS Rating of 96, reflecting robust earnings momentum. In contrast, previously high-flying tech growth stocks—especially select AI-related names—experienced notable pullbacks amid tightening global liquidity conditions.
U.S. markets extended their correction this week, reflecting investor sentiment weighed down by both geopolitical and monetary policy pressures. The Dow Jones Indus Actual(0DJIA) fell 1.15%, the S & P 500 Index(0S&P5) dipped slightly by 0.39%, and the Nasdaq Composite(0NDQC) posted the smallest decline at just 0.07%.
Market focus was entirely dominated by Middle East developments and Fed policy guidance. Although positive remarks from Israel regarding the Strait of Hormuz briefly lifted sentiment, the Fed’s hawkish tone in its rate decision—acknowledging resurgent inflationary pressures and sharply lowering future rate-cut expectations—became the key market suppressant. Traders now assign only a 50% probability to a rate cut in 2026, significantly below early-year expectations. Additionally, news that U.S. federal debt surpassed USD 39 trillion sparked long-term concerns about fiscal sustainability. In this environment, capital rotated out of high-valuation tech stocks into more defensive sectors. Energy was the only S&P sector to post gains this week, while the “Magnificent Seven” tech giants broadly declined, with Tesla leading the losses.
Mainland China’s A-share market saw a sharper correction, with the CSI 300 Index (000300) falling 2.19%. Trading volume on the final day contracted by 5.95% relative to its 50-day average, indicating that some investors opted to stay on the sidelines amid external shocks.
This adjustment stemmed largely from a sharp drop in external risk appetite. Surging oil prices and global stagflation fears—transmitted via northbound flows and sentiment—triggered significant pullbacks in previously hot cyclical sectors like nonferrous metals and chemicals. Nonetheless, internal market structure remains healthy, with AI computing infrastructure (CPO, memory chips) and select consumer segments (e.g., baijiu) showing notable resilience. Policy support remains solid: the PBOC reaffirmed its “moderately accommodative” stance, while the CSRC actively advances the capital market blueprint for the “Fifteenth Five-Year Plan.” Furthermore, 15 new hard-tech-themed funds have been approved to channel long-term capital into the market. These measures effectively contained panic sentiment and laid the groundwork for a potential rebound.
The Top 33 Portfolio declined 2.94% this week (8 gainers, 25 decliners), slightly underperforming the HSI. MODERN DENTAL(03600) was the top performer, surging 9.27%. Meanwhile, the Model Portfolio proved more resilient, averaging a modest 0.46% decline. CATL(03750)stood out with a 12.4% weekly gain and an RS Rating of 90, demonstrating exceptional relative strength. Since inception, the Top 33 strategy—based on screening for high industry strength and quality fundamentals—has consistently delivered relative outperformance during volatile periods.
From a technical perspective, the HSI has broken below both its 50-day moving average (-4.5393%) and 200-day moving average (-1.6356%), signaling a weakening medium-term trend and entry into a consolidation range. Near-term critical support lies at the psychological 25,000-point level; holding this zone could trigger a technical rebound, while resistance sits near 26,000 points. The HSTECH exhibits even weaker technicals, trading 9.6311% below its 50-day MA and 13.0853% below its 200-day MA, indicating a lack of sustained rebound momentum and confirming its position within a downtrend channel.
Southbound capital recorded net outflows totaling approximately HKD 6.531 billion this week—a stark reversal from the prior week’s strong inflows—reflecting cooling risk appetite among mainland investors amid recurring Middle East tensions and tighter global liquidity expectations. Specifically, fund flows turned cautious: net selling reached HKD 1.25 billion on March 17 during a market bounce, followed by modest inflows of HKD 1.2 billion on March 19 to add positions in blue chips like Alibaba. However, no large-scale bargain hunting occurred on March 20, suggesting southbound investors are currently favoring (wait-and-see) over actively absorbing dips, thereby reducing their market-supportive role compared to recent weeks.
Overall, global markets operated under dual pressure from Middle East geopolitics and the Fed’s hawkish stance this week, weighing heavily on risk assets. Hong Kong equities adjusted amid external headwinds, yet counter-trend southbound buying underscored their appeal as a valuation haven. Looking ahead, market direction will hinge critically on the evolution of geopolitical tensions and forthcoming Fed policy signals. Should Middle East tensions ease, risk appetite may recover; otherwise, markets could continue consolidating at current levels. Investing involves risk—please proceed with caution.
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published on March 20, 2026