Hang Seng raised 1.4%
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This week, the market showed a pattern of initial gains followed by a pullback, with the Hang Seng Index(HSI) rising 1.4%, although it failed to successfully reclaim the 25,000-point level. The Hang Seng Tech Index(HSTECH) gained 1.2%.
In the first half of the week, U.S. non-farm payrolls data came in far below expectations, significantly increasing the probability of an interest rate cut by the Federal Reserve in September. This led to a weaker U.S. dollar, which boosted gold stocks and interest rate-sensitive assets. Meanwhile, a series of domestic industrial policies were rolled out, keeping the tech and high-end manufacturing sectors active. Geopolitical risks eased marginally, with progress made in the U.S.-Russia summit, which helped reduce the risks of sanctions against China. With multiple positive factors supporting the market, stocks continued to rise in the first part of the week.
However, on Friday, the market faced a sudden setback: the Trump administration announced a threat to impose tariffs on imported drugs, causing a pullback in pharmaceutical stocks. Additionally, the policy of imposing a 100% tariff on imported semiconductor products led to a sharp decline in the semiconductor sector.
In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) rose by 1.6%, the Nasdaq Composite(0NDQC) increased by 2.9%, and the Dow Jones Indus Actual(0DJIA) gained 0.9%.
On the macroeconomic front, ISM data showed that the U.S. manufacturing PMI for July recorded 48, lower than expected and the previous value, marking the fifth consecutive month below the expansion-contraction line, indicating that U.S. manufacturing continues to be in contraction territory. Key subindices included: the New Orders Index at 47.1, below expectations and the previous value, marking the sixth consecutive month of contraction; the Prices Paid Index at 64.8, lower than expectations and the previous value, with a monthly drop of nearly 5 basis points, the largest drop since September of last year, indicating a reduction in material cost pressure for manufacturers; the Employment Index at 43.4, below expectations and the previous value, hitting the lowest level in over five years. Meanwhile, the U.S. Non-Manufacturing PMI for July recorded 50.1, below expectations and the previous value, approaching the May low and nearing the lowest level since June 2024.
On tariffs, the White House issued an executive order to redefine “reciprocal tariff” rates for certain countries: the annex of the order lists countries subject to individual tariff rates, while countries not listed will apply a unified 10% rate. If a country is found to evade tariffs by transshipping through third countries, a 40% transshipment tax will be imposed on those goods. The new tariff policy will officially take effect on August 7. Additionally, U.S. President Trump announced that a 100% tariff will be imposed on all imported products containing semiconductor components, though exemptions will be given to companies that have committed or actually moved production to the U.S. At the same time, a 25% additional tariff will be imposed on Indian goods in response to India’s “direct or indirect import of Russian oil.” Apple is expected to be largely unaffected by the tariff imposed on Indian goods due to its supply chain strategy.
On employment, the U.S. Bureau of Labor Statistics reported that non-farm payrolls for July saw a significant decline to 73,000, the lowest in nearly nine months, and significantly below expectations.
Additionally, the data for May and June was substantially revised down: May’s non-farm payroll increase was revised to 19,000, and June’s to 14,000. After the revisions, the combined total for May and June saw a reduction of 258,000 jobs. Over the past three months, the average increase in non-farm payrolls has been only 35,000, the worst performance since the pandemic began. In terms of unemployment claims, the initial jobless claims for the week ending August 2 rose to 226,000, slightly above market expectations; continuing claims for the week of July 19 reached 1.974 million, the highest level since November 2021, exceeding market expectations.
On interest rates, following the release of the non-farm payrolls data, market expectations for rate cuts surged significantly. According to the CME FedWatch Tool, as of August 7, the market is pricing in a 92.7% probability of a 25-BP rate cut in September, up sharply from 37.7% the previous week. The probability of a 25-BP cut in October has also increased from 13.7% to 61.5%, while the probability for a 25-BP cut in December is approaching 50%.
In the A-shares market, the CSI 300(000300) dipped early in the week before rebounding, closing up 1.2% for the week and regaining its 21-DMA. Weekly turnover declined compared with the prior week, staying only slightly above the 10-week average. The market remains in a rally attempt phase, with the 21-DMA serving as a key short-term support level, while the major resistance is concentrated around the July 2025 peak of 4,185.21 points.
On the trade front, data from the Ministry of Commerce showed that in the first half of the year, China’s total trade in services reached RMB 3.88726 trillion, up 8% y/y. Of this, exports rose 15% to RMB 1.6883 trillion, while imports grew 3.2% to RMB 2.19896 trillion, resulting in a service trade deficit of RMB 510.66 billion, narrowing by RMB 152.21 billion from a year earlier. According to customs statistics, China’s goods trade in July recorded a total import and export value of RMB 3.91 trillion, up 6.7% y/y, accelerating by 1.5 percentage points from June and marking the highest growth rate of the year. Exports rose 8% to RMB 2.31 trillion, while imports grew 4.8%, registering two consecutive months of positive growth. In the first seven months of 2025, total goods trade reached RMB 25.7 trillion, up 3.5% y/y.
In foreign exchange and gold reserves, the State Administration of Foreign Exchange reported that as of the end of July, China’s foreign exchange reserves stood at USD 3.2922 trillion, down USD 25.2 billion, or 0.76%, from the end of June, mainly due to the combined impact of currency translation and asset price changes. Data from the PBOC showed that China’s gold reserves reached 73.96 million ounces at the end of July, an increase of 60,000 ounces m/m, marking the ninth consecutive month of accumulation.
On the policy side, the People’s Bank of China, together with six other government departments, jointly issued the Guiding Opinions on Financial Support for New Industrialization (the “Opinions”). The core target is that by 2027, a well-developed and adaptable financial system will be in place to provide strong support for the high-end, intelligent, and green development of the manufacturing sector. The Opinions require financial institutions to establish a dedicated credit plan for manufacturing, optimize credit policies, and make comprehensive use of diversified financial tools such as loans, bonds, equity, and insurance.
Elsewhere, S&P Global Ratings released its latest report, maintaining China’s sovereign credit rating at “A+” with a “stable” outlook. The report highlighted the resilience of China’s economic growth and the effectiveness of its debt management, underscoring confidence in the country’s positive economic outlook.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 3.1% for this week. Our Hong Kong Model Portfolio rose by 1.8% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 971.7% vs. a 23.8% up for the Hang Seng.
The best performer in our Hong Kong 33 was CHINAGOLDINTL(02099), it’s a gold and base metal mining company headquartered in Canada. The stock gained 16.6% this week. EPS rating stands at 85, RS rating of 86, and A/D rating of A-.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index exhibited a pattern of initial declines followed by a rebound this week, with the 25,000-point level being temporarily reclaimed and then lost again. It ultimately found support near the 21-DMA. In terms of trading volume, total turnover for the week was slightly lower than last week, with four out of five trading days showing volume below the 50-DMA, and only Thursday’s volume matching the 50-DMA. On the technical support front, the 50-DMA has become an important short-term support level, while key resistance is concentrated around the July high of 25,735.89 points.
From a capital flow perspective, the Southbound inflow via the HK-China Stock Connect continued its strong net inflow, with a cumulative net inflow of HKD $21.751 billion, marking 12 consecutive weeks of net inflows.
Overall, despite the support from stronger expectations of a Fed rate cut, domestic policy incentives, and easing geopolitical risks, the Hong Kong stock market faced pressure from the new tariff policies announced by the Trump administration, which highlighted the vulnerability of the external environment. In the short term, the market may experience a tug-of-war between policy negotiations and technical movements. However, with continued support from Southbound inflows, the medium-term core factors remain unchanged: if the Fed delivers a rate cut in September, liquidity pressure will ease. Additionally, with Hong Kong stocks still at historically low valuations and the certainty of industrial upgrades, the market still has structural recovery momentum after the ongoing consolidation.
At this stage, it is recommended that investors remain calm and rational, avoid blindly chasing rallies, and prioritize stocks with better-than-expected earnings and stable technical patterns. Investors should adopt a cautious strategy and be flexible in responding to market volatility.
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published on August 8, 2025