Hang Seng raised 2.8%
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This week, Hong Kong’s equity market extended its upward trajectory, with the Hang Seng Index(HSI) gaining 2.8% and the Hang Seng Tech Index(HSTECH) surging 5.5%.
Multiple positive catalysts emerged: Early-week release of better-than-expected H1 social financing and loan data, coupled with improved US-bound exports, further boosted market sentiment. Several pharmaceutical firms announced drug R&D progress and international collaborations, driving gains in the healthcare sector. Midweek, the Central Financial and Economic Commission meeting proposed addressing “cutthroat competition” and guiding enterprises toward quality enhancement, effectively stimulating market confidence. News of US approval for H20 chip sales to China strengthened Nvidia’s performance, lifting AI hardware stocks. Despite late-week geopolitical tariff concerns, markets stabilized quickly. While lacking sustained upward momentum, the innovative drug sector remained robust due to the 11th round of centralized drug procurement and M&A expectations among multinational pharmaceutical firms. Traditional cyclical stocks like cement and catering faced pressure from weak property demand and lagging consumption recovery.
In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) rose by 0.6%, the Nasdaq Composite(0NDQC) gained 1.5%, both hitting new all-time highs; the Dow Jones Indus Actual(0DJIA) rose by 0.3%.
On the macro front, data from the U.S. Bureau of Labor Statistics shows that the June CPI increased 2.7% y/y, the highest since February this year, slightly exceeding expectations and higher than the previous value; it rose 0.3% m/m, in line with expectations but lower than the previous month, with energy prices being the main driver. Core CPI increased 2.9% y/y, meeting expectations and higher than the previous value. The m/m increase rebounded slightly from 0.1% last month to 0.2%, below expectations, marking the fifth consecutive month of being lower than anticipated. While the m/m increase in core CPI aligns with the Fed’s policy goals, it is not enough to support a rate cut decision in July. Meanwhile, the PPI increased 2.3% y/y, significantly below expectations and the previous value, marking the lowest since September 2024; it remained unchanged m/m, below expectations and the prior value. Core PPI increased 2.6% y/y, below expectations and the prior value, marking the lowest since March 2024; it remained flat m/m, lower than expectations and the previous value. It is worth noting that despite the zero growth in the overall PPI, the pressure on commodity input costs is accumulating, but has not yet fully transmitted to the consumer end. Additionally, data from the U.S. Department of Commerce shows that June retail sales rose 0.6% m/m, exceeding expectations and the previous value, ending a two-month consecutive decline. Retail sales in the “control group” directly contributing to GDP increased 0.5% m/m, with a 4.0% y/y growth, further confirming the resilience of consumption.
In the fiscal domain, data from the U.S. Treasury Department shows that June government revenue rose 13% y/y, while spending fell by 7% y/y, resulting in a fiscal surplus of $27 billion, a significant improvement from May’s $316 billion deficit. This marks the first surplus recorded in June since 2017, mainly due to a surge in tariff revenue: total customs duties in June amounted to $27 billion, up 17% m/m and a massive 301% y/y, setting a record for the highest single-month total; cumulative tariff revenue for this fiscal year has surpassed $113 billion, up 86% y/y, setting a record for a single fiscal year. The Treasury Department expects tariff revenue to exceed $300 billion for the year. Despite the monthly data improvement, the continuing fiscal deficit and rising national debt interest payments remain severe challenges.
On tariff policy, U.S. President Trump sent letters to Mexico and the EU, announcing that starting August 1, 2025, tariffs on goods imported from these countries will increase by 30%; the originally planned 50% tariff on copper imports will be extended to semi-finished products. Trump also stated that if no agreement is reached between Russia and Ukraine within 50 days, a 100% tariff will be imposed on Russia, along with secondary tariffs on countries purchasing Russian oil.
On the employment market, the U.S. Bureau of Labor Statistics reported that for the week ending July 12, initial jobless claims fell to 221,000, marking the fifth consecutive week of decline and the lowest since mid-April, indicating resilience in the labor market. Continuing jobless claims for the week ending July 5 rose to 1.956 million, with a four-week average of 1.9575 million, the highest since November 20, 2021.
On the A-share market, the CSI 300(000300) extended its upward trajectory this week, gaining 1.1% cumulatively. Weekly trading volume remained similar to the previous week, while daily volumes consistently exceeded the 50-day average. The market remains in a tentative rebound phase, with the 21-day moving average (21-DMA) serving as critical short-term support technically, while the 4,100-point psychological level forms overhead resistance.
Macro data showed China’s GDP reached RMB66.05 trillion in H1 at constant prices, up 5.3% year-on-year (y/y). Quarterly growth stood at 5.4% y/y in Q1 and 5.2% y/y in Q2, with Q2 expanding 1.1% quarter-on-quarter (q/q). June CPI rose 0.1% y/y but fell 0.1% month-on-month (m/m), while core CPI climbed 0.7% y/y, accelerating 0.1 percentage point (pp) from May. Retail sales growth slowed to 4.8% y/y, with catering revenue also easing. Value-added industrial output above designated size grew 6.8% y/y, led by robust production of new energy vehicles and industrial robots.
Trade figures from the General Administration of Customs indicated China’s merchandise trade reached RMB21.79 trillion in H1, up 2.9% y/y. Exports rose 7.2% to RMB13 trillion, while imports declined 2.7% to RMB8.79 trillion. Trade volume has stayed above RMB10 trillion for nine consecutive quarters, with H1 volume increasing over RMB600 billion y/y. Lithium battery and wind turbine exports surged over 20% y/y. China’s industrial robot export market share ranked second globally last year, with H1 exports continuing to grow 61.5% y/y. In June, dollar-denominated imports rose 1.1% y/y and exports 5.8% y/y. RMB-denominated trade hit RMB3.85 trillion, the second-highest monthly level, with exports up 7.2% y/y (led by electronic components and ships) and imports rising 2.3% y/y (first increase since February) on strong demand for IT components and fresh fruits.
Financial data from the People’s Bank of China showed aggregate financing to the real economy (AFRE) reached RMB22.83 trillion in H1, a RMB4.74 trillion y/y increase, including RMB4.2 trillion in June alone. The AFRE stock stood at RMB430.22 trillion at end-June, up 8.9% y/y. RMB loans increased RMB12.92 trillion during the period, with RMB2.24 trillion added in June, while RMB deposits grew RMB17.94 trillion. Money supply data showed M2 balance at RMB330.29 trillion (+8.3% y/y) and M1 at RMB113.95 trillion (+4.6% y/y) at end-June. The M2-M1 spread narrowed to 3.7 percentage points, shrinking 1.9pp from May.
Policy developments include the Ministry of Finance’s “Notice on Guiding Long-term Stable Insurance Investments and Strengthening Long-cycle Assessments for State-owned Commercial Insurers,” which enhances long-term performance evaluation to encourage stable capital allocation, reduce short-term volatility, and boost equity investment participation. This is expected to bring RMB1 trillion in incremental A-share funds. The Shanghai Stock Exchange issued “STAR Market Self-regulatory Guidelines No.5 – Growth Tier,” allowing unprofitable companies into the Growth Tier without additional listing requirements. All 32 existing unprofitable firms entered the tier upon implementation, with new unprofitable registrants joining from their listing dates.
Market news confirmed Nvidia CEO Jensen Huang’s statement that the US government approved export licenses, allowing resumption of H20 chip sales in China. At the China Chain Expo, Huang reiterated long-term commitment to China, announcing new AI chips tailored for the Chinese market as early as September.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 4.6% for this week. Our Hong Kong Model Portfolio rose by 3.1% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 933.0% vs. a 23.7% up for the Hang Seng.
The best performer in our Hong Kong 33 was LYGEND RESOURCE(02245), it’s a leading global provider of nickel full industry chain services. The stock gained 24.6% this week. EPS rating stands at 78, RS rating of 91, 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 its ascent along the 5-DMA, challenging the YTD high of 24,874.39 points. Turnover-wise, weekly volume expanded slightly compared to the previous week, with daily volumes only dipping below the 50-day average on Monday. Technically, the 21-DMA serves as crucial short-term support, while the year-to-date high of 24,874.39 forms key overhead resistance.
On the capital flow front, the Southbound inflow via the HK-China Stock Connect continued its net inflow momentum, with cumulative net purchases reaching HKD21.456 billion this week – a slight week-on-week decline but marking the ninth consecutive week of net inflows.
Overall, Hong Kong’s equity market exhibited an upward trajectory amid three key drivers: policy dividends from “anti-cutthroat competition” measures, AI-driven cost reduction breakthroughs, and innovative drug revaluation. Technology growth stocks spearheaded structural recovery, replacing traditional cyclical sectors. Moving forward, attention should focus on the July Politburo meeting’s policy tone, catalytic effects of the Global Biomedicine Summit on innovative drug stocks, and capital flow shifts following Stablecoins market liberalization.
At this stage, investors are advised to maintain a rational stance, avoid blind chasing of rallies, and prioritize stocks with better-than-expected earnings and robust technical patterns, adopting a prudent strategy to navigate market volatility flexibly.
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published on July 18, 2025