Hang Seng raised 0.4%
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 Hang Seng Index(HSI) rose 0.4%, while the Hang Seng Tech Index(HSTECH) declined 0.9%. Overall, the Hong Kong stock market exhibited a pattern of early weakness followed by a rebound.
To sum up the week’s performance in one sentence: sentiment was driven by China–U.S. relations, while domestic demand policies provided a backstop. Early in the week, the market responded positively to the preliminary framework agreement between China and the U.S. regarding the issuance of temporary export licenses for rare earths and the partial easing of restrictions on chipmaking equipment, alongside the release of domestic policy support measures.
However, in the latter half of the week, the market pulled back continuously due to divergences over specific agreement terms, rising trade tensions between Europe and the U.S., increasing domestic political uncertainty in the U.S., and escalating geopolitical risks. These factors, coupled with accelerated foreign capital outflows, led to a sharp rise in risk-off sentiment.
In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) was up 0.8%, the Nasdaq Composite(0NDQC) rose 0.7%, and the Dow Jones Indus Actual(0DJIA) gained 0.5%.
On the macro front, data from the U.S. Bureau of Labor Statistics showed that the May CPI increased 2.4% y/y, in line with expectations and higher than the previous reading; the m/m increase was 0.1%, below both expectations and the prior figure. Core CPI rose 2.8% y/y, lower than expected and unchanged from the previous reading; the m/m increase was also 0.1%, again below both expectations and the prior figure. May PPI rose 2.6% y/y, in line with expectations but lower than the prior reading; the m/m increase was only 0.1%, below economists’ consensus. Core PPI rose 3.0% y/y, the lowest level since August 2024, and came in below both expectations and the previous reading; the m/m increase was 0.1%, with goods prices (excluding food and energy) rising 0.2%, and services prices increasing 0.1%. Following the release of CPI and PPI data, U.S. President Trump publicly called twice for the Federal Reserve to cut interest rates. Financial markets reacted sharply, with Wall Street traders significantly increasing bets on Fed rate cuts. Market consensus has now shifted to expecting two rate cuts within the year. Interest rate swap markets show traders assigning a 75% probability to a rate cut by September. However, the Fed may still keep rates unchanged at next week’s FOMC meeting. According to the CME FedWatch Tool, as of June 12, the market sees a 97.4% probability of no rate change in June, a 69% probability of no change in July, and a 58.5% probability of a 25 bps cut in September.
On the employment front, data from the U.S. Bureau of Labor Statistics showed that nonfarm payrolls increased by 139,000 in May, the lowest since February but still slightly above expectations. However, it’s worth noting that revisions to the previous two months’ data resulted in a net decrease of 95,000 jobs, offsetting the apparent improvement. The May unemployment rate stood at 4.2%, unchanged from both expectations and the prior figure. The nonfarm payroll data partially eased concerns over large-scale layoffs by businesses. In addition, initial jobless claims for the week ending June 7 came in at 248,000, the highest since October 2024 and above both expectations and the prior figure; continuing claims for the week ending May 31 rose to 1.956 million, the highest since the end of 2021, also exceeding expectations.
On the tariff front, the U.S. Department of Commerce announced that, starting June 23, tariffs will be imposed on various steel-based household appliances, including dishwashers, washing machines, refrigerators, and other steel-derived products. According to the announcement, the 50% tariff on most countries will directly affect imports of the relevant products and may drive up end-consumer prices.
In the A-share market, the CSI 300(000300) declined 0.3% this week. Trading volume expanded compared to last week, though daily turnover only slightly exceeded the 50-day average volume on Wednesday and Thursday. The market is currently in a rally attempt phase, with the 50-DMA serving as a technical support level, while the May 14 high of 3,960.52 points acts as an overhead resistance level.
On the macro front, data from the National Bureau of Statistics showed that China’s CPI fell 0.1% y/y in May and declined 0.2% m/m. The y/y decline continued, while the m/m figure reversed from positive to negative, mainly due to falling energy prices. PPI dropped 3.3% y/y, a 0.6 percentage point wider decline than the previous month and the largest drop in over a year. PPI has remained in negative territory for more than two consecutive years, primarily due to imported deflationary pressures weighing on domestic industrial prices, along with a temporary decline in domestic energy and raw material prices. On an m/m basis, PPI fell 0.4%, unchanged from the previous month. While PPI remains at low levels, marginal improvements are evident: with continued macro policy support, supply-demand dynamics in some sectors have started to show signs of improvement, and price indicators are reflecting a more positive trend. In addition, data from the State Taxation Administration indicated that China’s real economy continued to expand in May. Manufacturing sales revenue accounted for 30.1% of the total national corporate sales revenue, continuing to provide strong support for economic growth. Sales revenue in the equipment manufacturing sector rose 7.5% y/y. Within sub-sectors, sales of railway, shipbuilding, and aerospace equipment, computer and communication equipment, and electrical machinery and apparatus increased by 15.1%, 13.1%, and 8.6%, respectively, maintaining robust growth.
On the trade front, data from the General Administration of Customs showed that China’s total goods trade value for the first five months of 2025 reached RMB 17.94 trillion, up 2.5% y/y. Exports totaled RMB 10.67 trillion, up 7.2%, while imports came in at RMB 7.27 trillion, down 3.8%. In May alone, the total value of goods trade was RMB 3.81 trillion, up 2.7% y/y; exports were RMB 2.28 trillion, up 6.3%, while imports reached RMB 1.53 trillion, down 2.1%.
In terms of gold and foreign exchange reserves, data from the People’s Bank of China and the State Administration of Foreign Exchange showed that by the end of May, China’s gold reserves stood at 73.83 million ounces (approximately 2,296.37 tons), representing a m/m increase of 60,000 ounces (around 1.86 tons), marking the seventh consecutive month of net additions, though the pace of accumulation has continued to slow. Over the same period, SAFE reported that foreign exchange reserves totaled USD 3.2853 trillion at the end of May, an increase of USD 3.6 billion from the end of April.
On the policy front, the General Office of the CPC Central Committee and the General Office of the State Council jointly issued the “Opinions on Deepening the Pilot Comprehensive Reform in Shenzhen to Promote Reform, Innovation, and Greater Openness,” proposing to enhance the real economy’s high-quality development through better allocation of financial, technological, and data resources. Specific measures include: allowing Guangdong–Hong Kong–Macao Greater Bay Area companies already listed on the Hong Kong Stock Exchange to list on the Shenzhen Stock Exchange in accordance with policy guidelines; supporting Shenzhen in deepening reform of the unmanned aerial vehicle flight management system and improving the regulatory framework for low-altitude airspace. In addition, China and the United States recently held a new round of economic and trade consultations in London and reached a framework agreement in principle, characterized by “small mutual concessions.” However, structural conflicts over rare earth exports and restrictions on high-tech products remain unresolved. China has resumed issuing rare earth export licenses to suppliers in regions including the U.S., with the clear stipulation that exports are limited to civilian use, such as in magnets and motor rotors, and are strictly prohibited for military applications, drawing a clear “no military use” red line. In response, the U.S. pledged to gradually ease export restrictions on certain high-tech products such as semiconductor design software and aerospace components, though the export ban on cutting-edge AI chips like Nvidia’s H20 remains in place—underscoring that its strategic containment of China in the tech sector has yet to soften.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 4.2% for this week. Our Hong Kong Model Portfolio rose by 0.6% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 839.2% vs. a 19.1% up for the Hang Seng.
The best performer in our Hong Kong 33 was BATELAB(02149), it’s a leading provider of analog IC pattern wafers in China. The stock gained 21.4% this week. EPS rating stands at 75, RS rating of 97, and A/D rating of A+.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index climbed early in the week but pulled back later, failing to hold above the key 24,000 level. While short-term technical pressure has emerged, the medium-term rebound trend remains intact. Trading volume expanded compared to recent weeks, with only Wednesday’s session slightly below the 50-day average volume; the other four trading days all recorded volumes above the 50-day average. On the technical support side, the 21-DMA continues to serve as a key short-term support level, while the March 19 high of 24,874.39 represents a major resistance level above.
Regarding the Southbound inflow via the HK-China Stock Connect, this week saw a net inflow of HKD 15.458 billion, extending the previous trend of net buying. It marked the fourth consecutive week of net inflows, each exceeding HKD 14 billion.
Overall, whether the market can stabilize will depend on three key variables:
1. Progress in policy negotiations — closely watching whether the EU’s retaliatory measures against the U.S. take effect in early July, the preparations for the high-level China–U.S. talks in August, and the pace of domestic pro-growth policy rollout;
2. Signs of easing liquidity pressure — requiring clearer guidance on the Fed’s rate cut path and improved HKD liquidity;
3. Geopolitical risk developments — especially whether Middle East tensions escalate into broader conflict, potentially disrupting global supply chains.
At this stage, investors are advised to remain calm and rational, avoid chasing rallies blindly, and prioritize stocks with stronger-than-expected earnings and solid technical setups, adopting a prudent and flexible strategy 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 June 13, 2025