Hang Seng raised 3.2%
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This week, equities staged a robust rally, with the Hang Seng Index(HSI) advancing 3.2% and the Hang Seng Tech Index(HSTECH) surging 4.1%.
The Middle East situation dominated trading in the first half of the week, as market sentiment swung rapidly in line with the “panic–containment–reconciliation” narrative, producing an initial decline followed by a strong rebound. Expectations of a policy shift by the Federal Reserve continued to build, and dovish comments from Powell fueled a broad-based rebound across property, financial, and growth stocks. Policy and industry catalysts rotated throughout the week, with themes such as virtual asset licensing, smart driving, and consumption stimulus trading actively in succession.
In the second half of the week, the market experienced a technical pullback, mainly constrained by two factors. First, after four consecutive sessions of gains, the Hang Seng Index approached its year-to-date high, prompting profit-taking pressure from accumulated gains. Second, the pullback was linked to volatility in the Hong Kong dollar exchange rate and tightening liquidity conditions—during New York trading hours, the Hong Kong dollar hit the 7.85 weak-side convertibility undertaking, triggering intervention by the HKMA, which sold U.S. dollars and bought HK$9.42 billion. This marginal tightening of liquidity led to swings in market sentiment, with some investors choosing to lock in profits or remain on the sidelines.
In the U.S. stock market, the three major indexes staged a strong rebound, with the S & P 500 Index(0S&P5) and the Nasdaq Composite(0NDQC) rising 2.9% and 3.7%, respectively, approaching all-time highs. The Dow Jones Indus Actual(0DJIA) closed up 2.8%, leaving 3.8% upside potential to its historical peak.
On the macro front, according to the latest data from S&P Global, the preliminary U.S. Markit Manufacturing PMI for June stood at 52, unchanged from the prior reading and marking the highest level since February. The Services PMI came in at 53.1 and the Composite PMI at 52.8; although both declined m/m, they exceeded market expectations. This set of PMI readings suggests the economy continued to expand at the end of Q2. However, revised data from the U.S. Department of Commerce showed that real GDP for Q1 recorded a final annualized q/q contraction of -0.5%, the first decline in three years, mainly dragged down by an expansion of imports and a reduction in government spending. Although private investment and consumer spending posted growth, they failed to fully offset these negative impacts, with final personal consumption expenditures rising by only 0.5%, marking the weakest quarterly performance since the pandemic. Meanwhile, the Q1 personal consumption expenditures (PCE) price index rose by 3.7% y/y, and the core PCE index increased by 3.5%, both revised up by 0.1 percentage point compared to prior estimates, reflecting continued intensification of consumer-side inflationary pressures. Notably, preliminary data for May durable goods orders surged by 16.4% m/m, primarily driven by a 230% spike in non-defense aircraft orders. Excluding transportation equipment, durable goods orders increased by 0.5% m/m, while core capital goods orders rose by 1.7%, both exceeding market forecasts. This structural divergence suggests that although volatility in aircraft orders dominated the headline figures, the rebound in business capital expenditure has provided a positive signal for Q2 GDP growth. However, whether the intensification of consumer-side inflation and the improvement in business investment can be sustained remains uncertain and warrants close observation regarding their combined impact on real economy demand.
In terms of interest rates, Federal Reserve Chair Powell reiterated during the first day of congressional testimony that the Fed would maintain a wait-and-see stance, while also signaling that “the possibility of initiating rate cuts earlier is not ruled out.” He emphasized that June and July economic data will be critical to assess whether tariff-driven price increases are weaker than expected, which will directly shape the timing of subsequent rate cuts. According to the CME FedWatch Tool, as of June 26, the probability of rates remaining unchanged in July fell to 79.3% from 87.2% a week prior; the probability of a 25 BP rate cut in September climbed to 74.9% from 56.3% a week earlier.
On the international front, tensions in the Middle East continued to escalate in recent days. U.S. forces first launched airstrikes on Iranian nuclear facilities, prompting Iran to retaliate by firing missiles at American bases in Qatar. Subsequently, the U.S., Israel, and Iran reached a brief ceasefire, but the agreement broke down after a senior Iranian commander was killed in Syria, with Iran vowing retaliation. Throughout the conflict, Israel maintained airstrikes on Iran-linked militant positions in Syria, while Houthi forces simultaneously launched drone attacks against targets inside Israel, creating a complex dynamic of proxy warfare intertwined with direct confrontation. Currently, Iran is accelerating efforts to repair its nuclear facilities and has deployed military assets in the Strait of Hormuz, while Israel remains mired in the contradiction of maintaining tactical advantages in Gaza amid growing strategic challenges. The deteriorating situation has already driven up crude oil and gold prices, and if shipping lane security comes under threat, global supply chains and inflationary pressures could face further intensification.
On employment, the latest data from the U.S. Bureau of Labor Statistics showed that initial jobless claims for the week ending June 21 fell by 1,000 to 236,000, below market expectations. However, continuing claims for the week ending June 14 surged to 1.974 million, not only marking the highest level since November 2021 but also extending a pronounced upward trend that has persisted for a month and a half. The record high in continuing claims reflects a clear lengthening of the re-employment cycle for job seekers, while the relatively stable initial claims indicate that although firms are slowing hiring, they have not yet initiated large-scale layoffs. The labor market is currently displaying a unique pattern of “slower hiring and limited layoffs,” which is making it increasingly difficult for the unemployed to find new jobs.
In the A-share market, the CSI 300(000300) rose 2.0% this week, overall showing a choppy pattern of early gains followed by late weakness. Trading volume moderately expanded compared to recent weeks: except for Monday, which was roughly in line with the 50-DMA, the other four sessions all remained above the 50-DMA. The market is currently in a rally attempt phase, with the 100-DMA serving as an important technical support, while upward pressure is coming from the March 19 high at 4,025.3 points, which forms a key resistance level.
On the macro front, data from the National Bureau of Statistics showed that in the first five months of the year, industrial enterprises above the designated size recorded total profits of RMB 2.72 trillion, down 1.1% y/y, mainly due to insufficient effective demand, falling industrial product prices, and short-term volatility factors. In May alone, profits of industrial enterprises above the designated size declined 9.1% y/y.
On the fiscal front, data from the Ministry of Finance showed that from January to May, national general public budget revenue totaled RMB 9.6623 trillion, down 0.3% y/y. Among this, tax revenue was RMB 7.9156 trillion, a decline of 1.6% y/y, while non-tax revenue increased 6.2% y/y to RMB 1.7467 trillion. Stamp duty revenue reached RMB 178.7 billion, up 18.8% y/y, with securities transaction stamp duty soaring 52.4% y/y to RMB 66.8 billion. On the expenditure side, general public budget spending amounted to RMB 11.2953 trillion for the same period, up 4.2% y/y, maintaining a moderately expansionary posture.
On the policy front, the PBOC and five other departments jointly issued the Guiding Opinions on Financial Support for Boosting and Expanding Consumption, outlining 19 specific measures across six areas, including enhancing consumption capacity, optimizing supply, and improving the consumption environment. The document explicitly introduced a dedicated re-lending facility for services consumption and elderly care, with a quota of RMB 500 billion. It emphasized improving investment and financing coordination mechanisms to guide medium- and long-term funds into the market and help stabilize capital markets.
At the same time, Li Chao, Deputy Director of the Policy Research Office at the NDRC, disclosed that the third batch of subsidies for consumer goods trade-in programs will start to be allocated in July, with policy implementation strength and funding pace expected to remain steady in the second half. So far, subsidy utilization has proceeded as planned, and the remaining RMB 138 billion in central government funds will be distributed in stages during Q3 and Q4. In addition, the Ministry of Commerce announced that it will organize the 2025 New Energy Vehicle Consumption Season in Thousands of Counties and Towns campaign from July through December to further unlock NEV consumption potential and foster new drivers of auto demand.
Of note, the PBOC and the Hong Kong Monetary Authority recently held a launch ceremony for the Cross-Border Payment Connect, which officially went live on June 22. The system marks the interconnection of Mainland China’s and Hong Kong’s real-time payment infrastructures, enabling residents in both regions to settle cross-border payments in real time.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 3.2% for this week. Our Hong Kong Model Portfolio rose by 2.4% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 837.8% vs. a 21.0% up for the Hang Seng.
The best performer in our Hong Kong 33 was MMG(01208), it’s a leading mining company in Australia. The stock gained 13.3% this week. EPS rating stands at 60, 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 delivered a strong performance this week. On Tuesday, the index staged a bullish gap-up and decisively broke above its 21-DMA, accompanied by a moderate expansion in trading volume. Wednesday saw the rally extend with another gap-up, as turnover continued to rise and approached its YTD high. The pullback on Thursday and Friday merely filled the gap left on Wednesday, while the index remained firmly above its 5-DMA. The 5-D, 10-D, 21-D, 50-D, and 200-D MA have now formed a bullish alignment.
In terms of turnover, four out of the five trading sessions this week recorded volumes above the 50-DMA, with overall weekly turnover rising notably compared to the prior week. From a technical support standpoint, the 21-DMA serves as a key near-term defense level, while the YTD high at 24,874.39 on March 19 remains the primary resistance above.
On the flow side, the Southbound inflow via the HK-China Stock Connect sustained net inflows this week, with total net buying of HKD 28.381 billion, marking the sixth consecutive week of net inflows.
Overall, the Hong Kong stock market approached its YTD high under the impetus of multiple positive drivers, maintaining a broadly strong tone, with continuous Southbound inflows providing resilient support. However, investors should remain vigilant regarding potential disruptions from geopolitical developments and the Federal Reserve’s upcoming policy moves. Next week, focus will turn to the release of China’s June PMI data, with a consensus forecast of 49.6 versus the prior reading of 49.5. In addition, the Hong Kong market will be closed on Tuesday, July 1, 2025, in observance of the Hong Kong Special Administrative Region Establishment Day holiday.
At this stage, investors are advised to stay calm and rational, avoid indiscriminate chasing of rallies, and prioritize stocks with earnings significantly above expectations and robust technical setups, adopting a disciplined strategy to navigate market fluctuations.
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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 June 27, 2025