Hang Seng raised 2.3%
Editor’s Note: As always, we would appreciate any feedback you have. It will help us make this app more useful to you.
This week, the Hong Kong stock market continued its upward momentum, with the Hang Seng Index(HSI) rising 2.3% and the Hang Seng Tech Index(HSTECH) increasing by 2.5%, but overall showing a “rally followed by pullback” pattern.
The upward movement in the first half of the week was driven by a combination of policy catalysts and improvements in market liquidity. The launch of the Yarlung Zangbo River 1.2 trillion yuan hydropower project directly boosted the cement, construction machinery, and steel sectors, with state-owned infrastructure stocks surging. In addition, the State Administration of Foreign Exchange’s statement about “continued foreign capital inflows” and Middle Eastern sovereign wealth funds increasing their allocation to Chinese assets significantly restored market confidence. At the same time, the market regulator’s meeting with food delivery platforms to address “involution” eased concerns about intense competition among giants such as Meituan and JD.com. Tencent’s new game approval, coupled with the presence of top influencers on Kuaishou, further boosted the valuation of tech stocks.
A pullback occurred on Friday, mainly due to the concentrated release of internal and external pressures: Yarlung Zangbo-related stocks and the photovoltaic sector faced profit-taking due to a cooling of policy expectations and concerns over excess capacity. Fitch’s downgrade of the U.S. industry outlook to “negative” raised global risk aversion, along with the nearing August 1st deadline for U.S.-EU tariff negotiations.
In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) rose 1.1%, the Nasdaq Composite(0NDQC) rose 0.8%, both hitting new all-time highs again; the Dow Jones Indus Actual(0DJIA) rose 0.8%.
On the macroeconomic front, S&P Global data shows that the July Markit Manufacturing PMI in the U.S. dropped to 49.5, marking the lowest level since December 2024, and the first contraction since December of last year, significantly missing expectations and the previous reading. The preliminary Markit Services PMI came in at 55.2, the highest since December 2024, better than expected and above the previous reading. The preliminary Markit Composite PMI was 54.6, the highest since December 2024, exceeding expectations and the prior reading. The manufacturing sector saw its first deterioration of the year, reflecting a concerning imbalance in economic growth, heavily reliant on the services sector. The weakening manufacturing conditions were directly related to the diminishing effect of the “tariff preemptive trading” boost. Furthermore, both manufacturing and services sectors’ business confidence for the next 12 months has fallen to one of the lowest levels in the past two and a half years.
On tariffs, U.S. President Trump announced plans to impose simple tariffs ranging from 15% to 50% on most other countries and has reached a 15% tariff agreement with Japan. Additionally, it is reported that the EU and the U.S. are moving towards a trade agreement, with tariffs on most products expected to be set at 15%.
In the labor market, the U.S. Bureau of Labor Statistics data showed that the number of initial jobless claims for the week ending July 19 dropped to 217,000, lower than expected and the previous reading, reaching a new low since mid-April. This marks the sixth consecutive week of decline, the longest consecutive drop since 2022, signaling continued resilience in the U.S. labor market and reinforcing the case for the Fed to keep rates unchanged. The number of continuing claims for unemployment benefits for the week ending July 12 rose to 1.955 million, remaining at high levels not seen since 2021, with continuing claims exceeding 1.9 million for the ninth consecutive week. This shows that while large-scale layoffs have not occurred, it remains difficult for the unemployed to re-enter the workforce, reflecting structural pressure in the labor market.
On interest rates, following the release of employment data, traders further reduced bets on rate cuts, with expectations that there will be fewer than two rate cuts this year. According to the CME FedWatch tool, as of July 24, the market sees a 97.4% probability of no rate change in July, a 60.5% probability of a 25 basis point rate cut in September, and less than a 50% probability of a rate cut in both October and December.
On policy, the Trump administration has revoked the AI regulatory framework from the Biden administration and released the “AI Action Plan,” aimed at accelerating U.S. AI development by relaxing regulations, expanding energy supply to data centers, and other measures. The plan seeks to establish U.S. technology as the global infrastructure for AI.
In other news, international rating agency Fitch recently released its mid-year report, downgrading the outlook for 25% of U.S. industries in 2025 from “Neutral” to “Deteriorating.” This downgrade is mainly due to surging policy uncertainty, slowing economic growth, and expectations of prolonged high interest rates. The downgrade highlights structural risks for the U.S. amid trade disputes and fiscal overspending.
In the A-shares market, the CSI 300(000300) continued its upward trend this week, rising by 1.7%, successfully breaking through the 4100-point mark. Weekly trading volume significantly increased compared to last week, marking the highest weekly volume since November 8, 2024, with daily trading volumes consistently above the 50-day average. The market remains in an attempt to rebound phase, with technical support at the 21-DMA as an important short-term support level, while the key resistance is focused around the 4200-point mark.
On policy, the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) jointly released the “Amendment Draft of the Price Law of the People’s Republic of China (Soliciting Opinions).” The amendment clarifies the improvement of the standards for identifying predatory pricing and accurately addresses “involution-style” competition. At the same time, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council has instructed state-owned enterprises (SOEs) to take the lead in resisting malicious competition and strengthening restructuring and integration to optimize capital allocation. This revision marks the first major adjustment since the implementation of the Price Law in 1998. Meanwhile, the Chief Engineer of the Ministry of Industry and Information Technology (MIIT) announced that China will launch a new round of work plans to stabilize growth in key industries such as steel, non-ferrous metals, petrochemicals, and building materials. The plan will focus on structural adjustments, supply optimization, and the elimination of outdated production capacity, with specific implementation plans to be officially announced soon.
In terms of medical reform, the National Healthcare Security Administration (NHSA) has adjusted the drug procurement rules, removing the model where contracts were awarded solely based on the lowest bid price, and requiring companies to justify the reasonableness of their pricing. At the same time, it is promoting the establishment of a synchronized adjustment mechanism for the commercial insurance list of innovative drugs and the medical insurance list to support the application and development of new drugs with high clinical value.
On the construction of Free Trade Zones, the Hainan Free Trade Port’s customs closure will officially start on December 18 this year. The current core policies include: first, the proportion of “zero-tariff” imported goods under the “first-line” import category will increase from 21% to 74%; second, more relaxed trade management measures will be implemented; third, optimizing passage convenience by relying on the existing eight open ports on the island; and fourth, establishing a more efficient and precise regulatory system.
In terms of major projects, the “Yarlung Zangbo River Lower Reaches Hydroelectric Project” has officially commenced. The total investment in the project is 1.2 trillion yuan, with plans to build five cascade hydropower stations. Once completed, it will become the world’s largest hydropower dam, expected to create hundreds of thousands of jobs and increase Tibet’s fiscal revenue by 20 billion yuan annually.
Regarding monetary policy, the Loan Prime Rate (LPR) for July has remained unchanged for the second consecutive month, with the 1-year rate staying at 3.0% and the 5-year and above rate holding at 3.5%. Currently, the monetary policy has entered an observation period. With the 7-day reverse repo rate in the open market remaining stable, the unchanged LPR rates align with market expectations. Most market institutions expect that there is still room for further downward adjustment in the LPR in the second half of the year.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 4.0% for this week. Our Hong Kong Model Portfolio rose by 2.9% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 974.4% vs. a 26.7% up for the Hang Seng.
The best performer in our Hong Kong 33 was CHINA LIFE(02628), it’s a leading enterprise in China’s life insurance industry. The stock gained 15.7% this week. EPS rating stands at 71, RS rating of 83, and A/D rating of A+.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index continued to strengthen, successfully breaking through the 25,000-point level this week, reaching a new high since October 2021. Trading volume was significantly higher than in previous weeks, with daily volume consistently above the 50-day average. In terms of technical support, the 21-day moving average is an important short-term defense level, while the key resistance is at the 26,000-point level.
In terms of market liquidity, the Southbound inflow via the HK-China Stock Connect continued its net inflow trend, with a total net purchase of HKD 32.351 billion this week, a significant increase from last week, marking the 10th consecutive week of net inflows. Notably, on Friday, the net inflow exceeded HKD 20 billion in a single day, the largest single-day net inflow since January 20, 2021.
In conclusion, this week the Hong Kong stock market broke through key levels under the influence of policy catalysts and foreign capital inflows. However, the pullback on Friday reflected short-term profit-taking pressures and external uncertainties. Going forward, attention should be focused on the outcome of tariff negotiations and the tone set by the upcoming Chinese Politburo meeting, while earnings results during the mid-year reporting season may pose earnings pressure for sectors with high crowdedness.
At this stage, it is recommended that investors remain calm and rational, avoiding blind chasing of rallies, and instead focus on stocks with better-than-expected earnings and stable technical patterns. A prudent strategy should be adopted to navigate market volatility.
What do you think? Please email us any questions or comments.
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 July 25, 2025