Hang Seng fell 1.3%
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This week, the Hang Seng Index(HSI) declined 1.3%, while the Hang Seng Tech Index(HSTECH) fell 1.5%, with the Hong Kong stock market showing a pattern of early weakness, mid-week rebound, and late-week retreat.
At the start of the week, the market came under pressure due to concerns over former President Trump’s tariff remarks and intensifying price wars among e-commerce platforms. Sentiment later improved on the back of positive developments such as credit outlook upgrades from S&P and Moody’s, as well as continued growth in industrial profits, fueling a market rebound. Notably on Thursday, a breakthrough in the tariff dispute and expectations that restrictions on China’s innovative drug exports may be lifted triggered a sharp rally.
However, sentiment turned cautious again after a U.S. federal appeals court ruled in favor of Trump’s continued imposition of import tariffs, reigniting uncertainty among global investors and dragging the market lower. Month-end portfolio rebalancing by institutional investors also added to overall market volatility.
In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) rose 1.9%, the Nasdaq Composite(0NDQC) gained 2.3%, and the Dow Jones Indus Actual(0DJIA) increased 1.5%.
On the macroeconomic front, data from the U.S. Department of Commerce’s Bureau of Economic Analysis showed that the revised annualized q/q growth rate of real GDP for Q1 was -0.2%. This figure represents a slight upward revision from the previously released preliminary estimate but still indicates that the U.S. economy contracted at the beginning of the year. The upward revision was mainly driven by stronger business investment and increased inventory accumulation. However, consumer spending—the main engine of economic growth—rose by only 1.2% in the first quarter, marking the slowest pace in nearly two years. In addition, corporate profits plunged 2.9%, the sharpest decline since 2020. Meanwhile, the core Personal Consumption Expenditures (PCE) Price Index for Q1 was slightly revised down to an annualized q/q rate of 3.4%. Although inflation came in slightly below the initial estimate, it remains stubbornly high, heightening market concerns about a potential “stagflation” scenario.
In terms of monetary policy, the minutes from the Federal Reserve’s May policy meeting revealed that several officials lacked confidence in the recent slowdown in inflation, with some members even suggesting that further policy tightening might be necessary if inflation remains elevated. This hawkish tone dampened market expectations for rate cuts later this year. At the same time, U.S. President Trump recently met with Federal Reserve Chair Jerome Powell and explicitly pressured the Fed to accelerate rate cuts, arguing that the current interest rate levels weaken the U.S.’s competitive edge relative to the EU and China, both of which have adopted more accommodative policies. Powell, however, reaffirmed the principle of monetary policy independence, emphasizing that decisions would be based strictly on economic data rather than political considerations.
On the employment front, data released by the U.S. Department of Labor showed that for the week ending May 24, initial jobless claims decreased by 14,000 to 240,000, significantly exceeding analysts’ expectations of 226,000, reaching the highest level since November 2021. At the same time, continuing claims for the week ending May 17 increased by 26,000 to 1.919 million, also the highest level since November 2021.
In policy developments, the U.S. Court of International Trade recently ruled that certain tariffs imposed by the Trump administration under the International Emergency Economic Powers Act were unlawful; these tariffs had been temporarily suspended. However, at the government’s request, the federal appeals court later stayed the execution of this ruling, allowing the tariff measures to remain in effect. Meanwhile, the Trump administration is also considering imposing new temporary tariffs of up to 15% on most imported goods for a period of 150 days under existing laws, aiming to strengthen its leverage in trade negotiations. Overall, the current U.S. tariff policy is at a critical juncture of legal dispute and policy adjustment, and its future direction remains highly uncertain.
In the A-share market, the CSI 300(000300) declined 1.1% this week, continuing its downward correction and successively breaking below the 100-DMA and 21-DMA. By the end of the week, support at the 50-DMA also gave way. Trading volume remained at extremely low levels, with daily turnover consistently below the 50-day average volume. The market is still in a rally attempt phase, with technical support located at the gap between 3809.09 and 3814.99 points formed on May 7 this year, while the 100-day moving average serves as the overhead resistance.
On the macro front, data from the National Bureau of Statistics showed that profits of industrial enterprises above designated size grew 1.4% year over year in the January–April period, accelerating by 0.6 percentage points compared to the January–March period, signaling a continued recovery trend. In terms of industry structure, 23 out of 41 major industrial sectors recorded year-over-year profit growth, with nearly 60% of the sectors expanding. In April alone, profits of industrial enterprises above designated size rose 3% y/y, up 0.4 percentage points from March. Profit growth was particularly strong in emerging sectors such as equipment manufacturing and high-tech manufacturing. For example, profits in smart in-vehicle device manufacturing and unmanned aerial vehicle manufacturing surged 177.4% and 167.9% y/y, respectively. According to data from the Ministry of Finance, in the January–April period, total operating revenue of state-owned enterprises reached RMB 26.2755 trillion, roughly flat compared to the same period last year, while total profit was RMB 1.34914 trillion, down 1.7% y/y. As of the end of April, the asset-liability ratio of state-owned enterprises was 65.1%, up 0.2 percentage points y/y.
In the foreign exchange market, both the onshore and offshore RMB exchange rates against the U.S. dollar strengthened, with the intraday rate briefly breaking through the 7.17 level, reaching the highest level since December 2024. As market confidence in U.S. dollar assets has wavered, the traditional pattern of a strong dollar under a high interest rate environment has been disrupted. An increasing amount of capital is being observed exiting dollar-denominated assets and gradually flowing into non-dollar currencies, including the RMB. This appreciation trend in the RMB is expected to provide support to China’s stock market.
In other developments, Moody’s announced that it would maintain China’s sovereign credit rating at “A1” with a negative outlook. In response, an official from the Ministry of Finance stated that since the fourth quarter of last year, the Chinese government has introduced a series of macroeconomic policy measures, and current economic indicators show a recovery and improvement trend. Market expectations and confidence remain stable, and the medium- to long-term sustainability of debt has significantly improved. Moody’s decision to maintain China’s sovereign credit rating reflects the continued improvement of the country’s economic fundamentals.
Leading stocks failed this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.8% for this week. Our Hong Kong Model Portfolio fell by 3.2% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 789.4% vs. a 16.1% up for the Hang Seng.
The best performer in our Hong Kong 33 was JOHNSON ELEC H(00179), it’s a leading investment holding company in China engaged in the manufacturing and sales of drive systems. The stock gained 13.6% this week. EPS rating stands at 95, RS rating of 92, and A/D rating of A+.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hong Kong market experienced significant volatility this week, with the Hang Seng Index finding some support near its 21-DMA. Weekly trading volume expanded compared to previous weeks, though on a daily basis, only Friday’s turnover exceeded the 50-D average; trading volume on the other days remained below that threshold. In the short term, support remains at the 50-DMA, while resistance is located near the key 24,000 level.
In terms of the Southbound inflow via the HK-China Stock Connect, there was a total net inflow of HKD $28.074 billion this week, a marked increase from the previous week and the largest weekly inflow since the week of April 18, 2024.
Overall, the Hong Kong market saw pronounced fluctuations this week, driven by a confluence of factors including global trade policy developments, corporate earnings performance, sector dynamics, and investor sentiment. Despite the index finding support at key moving averages, trading momentum remains relatively weak, suggesting limited market participation. On a more positive note, the robust net Southbound inflow provided strong underlying support, reflecting domestic investors’ growing recognition of the long-term value in Hong Kong equities. Looking ahead, developments in tariff policy and the pace of corporate earnings recovery remain key variables that could shape the market’s direction and warrant close attention.
At this stage, investors are advised to stay calm and rational, avoid chasing short-term rallies, and focus instead on fundamentally strong stocks with solid earnings surprises and constructive technical setups. A balanced and flexible strategy remains prudent amid ongoing market volatility.
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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 May 30, 2025