Hang Seng raised 0.5%
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Monday of this week marked the establishment anniversary of the Hong Kong Special Administrative Region, resulting in a one-day closure of the Hong Kong Stock Exchange. The Hang Seng Index rose by 0.5% this week, while the Hang Seng Tech Index increased by 1.2%. Over the weekend, the market was not impacted by significant negative news. Instead, the release of the US core Personal Consumption Expenditures (PCE) index data for May last Friday strengthened expectations of a potential interest rate cut by the Federal Reserve in September this year. Furthermore, news of national fiscal and tax reforms is expected to have far-reaching implications on the capital markets, particularly boosting consumer expectations. At the same time, several internationally renowned financial institutions have successively released outlook reports on the Chinese market, generally holding optimistic views on the Chinese economy and favoring Chinese high-yield stocks.
In the US stock market, Thursday saw a one-day closure due to Independence Day. As of this Wednesday, both the S&P 500 and Nasdaq indices have once again hit record highs, rising by 1.4% and 2.6% respectively, while the Dow Jones Industrial Average increased by 0.5%, firmly above its 50-DMA. Macro data-wise, the US core Personal Consumption Expenditures (PCE) price index for May rose by 2.6% y/y, marking a new low since March 2021 and providing strong support for expectations of a Fed interest rate cut in September this year. The month-on-month growth rate of the core PCE price index was 0.1%, the lowest since December 2023. The CME Group’s FedWatch Tool indicates a 61% probability of a 25-basis-point rate cut by the Fed in September. Additionally, the US ISM Manufacturing Index for June was 48.5, below expectations and slightly lower than the previous value. The manufacturing sector has contracted for three consecutive months, with the price index showing the largest decline in over a year. The ISM Services Index for June was 48.8, below expectations and the previous value, marking the fastest contraction in four years. On the employment front, ADP reported a gain of 150,000 jobs in June in its private payroll report, below expectations and previous figures, marking the third consecutive month of decline and the lowest level in four months. Initial jobless claims for the week ending June 29 in the US were 238,000, exceeding market expectations and reaching the highest level since January this year.
The CSI 300 fell 0.9% this week on volume below the average and lower than the last week. The market condition was Downtrend. The index continued to fall this week, with support turning to the February 2 low of 3108. The official manufacturing PMI for June came in at 49.5, unchanged from the previous value but below expectations. The unofficial Caixin services PMI for June came in at 51.2, below the previous value.The U.S. PCE price index rose 2.6% year-on-year in May, lower than the previous value. The core PCE price index rose 2.6% year-on-year in May, lower than the previous value, and rose 0.1% m/m, the smallest gain in six months. The data suggests inflationary pressures are easing and expectations of rate cuts are back. Trump’s approval rating rose in the first round of U.S. presidential debates. A-share export stocks came under pressure on concerns about his more aggressive tariff policies. Market sentiment continues to be sluggish. Investors are advised to operate cautiously and adopt a defensive strategy. Follow-up attention is the twentieth session of the Third Plenary Session, which will be held in mid-July. Northbound outflow via the HK-China Stock Connect was RMB13.9B.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 1.0% for this week. Our Hong Kong Model Portfolio fell by 1.3% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 562.5% vs. a 12.7% down for the Hang Seng.
The best performer in our Hong Kong 33 was SWIRE PACIFIC A(00019), it’s a Hong Kong investment holding company primarily engaged in real estate business. The stock gained 5.8% this week. EPS rating stands at 90, RS rating of 85, and A/D rating of B.
Our Hong Kong Market Status are on an Rally Attempt.
From a technical analysis perspective, in the first three trading days of this week, despite the market showing an upward trend, it is regrettable that the key resistance levels of 18,000 points and the 21-DMA have proven difficult to surpass. After briefly touching these critical levels, the indices quickly retreated, indicating significant overhead pressure remains. Regarding the Southbound inflow via the HK-China Stock Connect, this week continued the trend of net inflows, totaling HK$10.891 billion, an increase from the previous week, marking the 21st consecutive week of net inflows. Faced with the current market adjustments, investors should remain calm and avoid blind following. At the same time, they should focus on stocks that have outperformed expectations and show strong technical performance.
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published on July 5, 2024