Hang Seng raised 2.5%
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This week, the Hang Seng Index rose by 2.5%, and the Hang Seng Tech Index increased by 4.0%. The market officially entered the “Trump 2.0” era, with enhanced expectations for Sino-U.S. cooperation, the reconciliation between TikTok and the U.S. government, and policy expectations following Trump’s inauguration, all positively impacting the market. However, the mid-week announcement of policies regarding the entry of medium- and long-term funds into the market largely reiterated previous measures, leading to a muted investor response and no significant improvement in market performance. Overall, this week saw more positive news, with most sectors rising and a positive sentiment in the Hong Kong stock market.
In the U.S. stock market, trading was closed on Monday in observance of Martin Luther King Jr. Day. As of Thursday, the S&P 500 gained 2.0%, reaching a record high, while the Nasdaq rose 2.2%, and the Dow Jones Industrial Average climbed 2.5%. On Monday, Donald Trump was officially inaugurated as President of the United States. During his inaugural speech, he stated that the U.S. government would further evaluate before deciding whether to impose additional tariffs on Chinese exports—a stance that had a positive impact on the markets. Meanwhile, market sentiment toward future economic prospects remains optimistic. Goldman Sachs forecasts that U.S. economic and consumer growth in 2025 will surpass market expectations, with corporate earnings growth likely to drive a 7% increase in dividends for S&P 500 constituents. Morgan Stanley also believes the bull market may have room to run, citing corporate earnings growth and a low-inflation environment as key support factors. Additionally, expectations for a Federal Reserve rate cut have shifted. As of January 23, data from the CME FedWatch Tool indicates a high likelihood of a 25-BP rate cut at the June FOMC meeting. On the employment front, the U.S. Department of Labor reported that initial jobless claims for the week ending January 18 came in at 223,000, higher than both expectations and the prior reading. Meanwhile, continuing claims for the week ending January 11 rose by 46,000 to a seasonally adjusted 1.899 million, exceeding expectations and marking the highest level since November 2021.
Regarding the A-share market, the CSI 300 Index rose 0.5% this week, closing slightly above the 21-DMA on Friday but remaining below the 50-DMA. Trading volume was flat compared to last week but still below the 50-day average volume, indicating that the market is currently in a rally attempt phase. The week continued to see sideways consolidation, with Friday’s gain pushing the index above the 21-DMA. At this stage, the support level is at the 21-DMA, with secondary support at the January 13 low of 3,704.11, while resistance lies at the 50-DMA. On the macroeconomic front, data from the National Bureau of Statistics showed that preliminary calculations estimate China’s GDP for 2024 at RMB 134.91 trillion, a y/y growth of 5%. In the fourth quarter, GDP grew by 5.4% y/y. For 2024, the value added by large-scale industrial enterprises increased by 5.8%, the value added by the services sector rose by 5%, total retail sales of consumer goods grew by 3.5%, and fixed asset investment increased by 3.2%. The nationwide surveyed urban unemployment rate fell by 0.1 percentage points compared to the previous year, and per capita disposable income grew by 5.1% in real terms. Regarding interest rates, the People’s Bank of China authorized the National Interbank Funding Center to announce that the Loan Prime Rate (LPR) on January 20, 2025, remained unchanged from the previous level: the one-year LPR was 3.1%, and the LPR for loans over five years was 3.6%. On the policy front, six departments jointly issued the Implementation Plan on Promoting Long-Term Funds to Enter the Market, emphasizing the further participation of long-term funds, such as commercial insurance funds, the National Social Security Fund, the Basic Pension Fund, enterprise annuities, and public funds, to increase their involvement in the market.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 3.5% for this week. Our Hong Kong Model Portfolio rose by 5.0% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 605.5% vs. a 0.01% down for the Hang Seng.
The best performer in our Hong Kong 33 was YOFC(06869), it’s a global leader in providing optical fiber preforms, optical fibers, optical cables, and integrated solutions. The stock gained 49.0% this week. EPS rating stands at 73, RS rating of 95, and A/D rating of A-.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, this week the Hang Seng Index broke through both the 50-DMA and the 20,000-point round number. Although there was some adjustment in the middle of the week, the index found solid support at the 50-DMA, demonstrating market resilience. The next support level is at the low point of January 13, with resistance at the December 2024 high. In terms of trading volume, this week’s volume was slightly higher than last week and above the 50-day average. In terms of the Southbound inflow via the HK-China Stock Connect, there was a net inflow of 9.096 billion Hong Kong dollars, continuing the trend of inflows but showing a noticeable decline from last week. Next week, despite the upcoming Chinese New Year holiday, several important data points will be worth monitoring. Domestic PMI data for January will be released, and the earnings season for major tech giants in the U.S. will begin, which could significantly impact U.S. stock performance and, in turn, influence the Hong Kong market. In summary, global political uncertainties may still impact the market. It is advised that investors remain calm and rational, avoid blindly following trends, and focus on stocks with strong earnings performance and robust technical indicators, applying a cautious investment strategy in response to market fluctuations.
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published on January 24, 2025