Hang Seng raised 4.5%
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This week, the Hong Kong stock market saw a significant uptrend, with the Hang Seng Index rising 4.5% and the Hang Seng Tech Index surging 9.0%. The rally was primarily driven by the soaring popularity of AI applications such as DeepSeek, injecting fresh growth momentum into the market and fueling a sharp rebound in technology stocks. Meanwhile, the Chinese government’s subsidies for consumer electronics have helped shorten the upgrade cycle, boost sales, and further stimulate downstream demand recovery. Additionally, the market sentiment improved, leading to a noticeable easing of short-selling pressure.
As of this Thursday, U.S. stocks advanced, with the S&P 500 up 0.7%, the Nasdaq rising 0.8%, and the Dow Jones gaining 0.5%. Macro data indicates a rebound in the manufacturing sector while the services sector faces pressure. According to data released by S&P Global and ISM, the January Markit Manufacturing PMI preliminary reading was 50.1, with the final reading rising to 51.2, marking the highest level since June last year. Meanwhile, the ISM Manufacturing Index climbed to 50.9, the highest since September 2022, signaling the first expansion in U.S. factory activity since 2022, driven by stronger orders and accelerated production, leading to a more optimistic outlook for the manufacturing sector. In contrast, service sector growth slowed. The January Markit Services PMI preliminary reading fell to 52.8, the lowest since April last year, while the ISM Services PMI also declined to 52.8, both missing expectations, indicating that the growth momentum of the U.S. economy’s key pillar—the services sector—has weakened. On the economic front, data from the U.S. Department of Commerce showed that the preliminary estimate for Q4 real GDP annualized q/q growth was 2.3%, below market expectations, with full-year growth at 2.8%, slightly lower than in 2023 and 2022. On inflation, data from the Bureau of Economic Analysis showed that in December, the PCE Price Index rose 2.6% y/y, while core PCE increased 2.8% y/y, in line with expectations. Regarding monetary policy, the Federal Reserve decided to keep the federal funds rate target range unchanged at 4.25%-4.50% in its latest FOMC meeting. The statement removed references to a “softening labor market” and “rising unemployment rate,” replacing them with “a strong labor market with a stable and low unemployment rate.” Additionally, the statement no longer mentioned “progress toward the 2% inflation target” but reiterated that inflation remains elevated, emphasizing that future rate adjustments will depend on the “degree and timing,” implying uncertainty about the timing of rate cuts. The labor market showed mixed signals. A report from the Bureau of Labor Statistics indicated that December JOLTS job openings fell to 7.6 million, the lowest since September 2023, reflecting a slowdown in labor demand. However, ADP data showed that U.S. employment increased by 183,000 in January, the highest since October last year, with December figures significantly revised upward, suggesting resilience in the labor market, which could impact expectations for Fed rate cuts. Additionally, initial jobless claims for the week ending February 1 came in at 219,000, slightly above expectations, while continuing claims from the prior week rose by 36,000 to 1.886 million. Meanwhile, Challenger-reported layoffs in January increased 28.36% m/m to 49,795, highlighting a complex employment landscape. Both initial and continuing jobless claims exhibited fluctuations, further underscoring the labor market’s volatility and uncertainty.
In the A-share market, the CSI 300 Index rose 2.0% this week. Despite only three trading days, the index successfully reclaimed its position above the 50-DMA, driven by gains on Thursday and Friday. In terms of trading volume, Thursday’s volume was in line with the 50-D average, while Friday’s volume was significantly higher, indicating that the market is currently in a rally attempt. The 50-DMA serves as the key support level, with secondary support at the January 13 low of 3,704.11. On the upside, resistance is located at the January 2 gap, with secondary resistance at the psychological level of 4,000 points. On the macroeconomic front, data from China’s National Bureau of Statistics showed that in January 2025, the official Manufacturing PMI fell to 49.1, slipping back into contraction territory for the first time in three months. The Non-Manufacturing PMI and Composite PMI also declined to 50.2 and 50.1, respectively, both lower than the previous readings. Meanwhile, the profits of large-scale industrial enterprises rebounded, rising 11.0% y/y in December 2024, reversing the 7.3% decline in November. Revenue increased by 4.2% y/y, with the growth rate accelerating by 3.7 percentage points compared to November. According to Caixin, China’s January 2025 Manufacturing PMI dropped to 50.1, marking a four-month low but remaining in expansion territory, while the Services PMI declined to 51.0, the lowest since October 2024. On the policy front, China’s State Council Tariff Commission announced that, effective February 10, 2025, additional tariffs will be imposed on certain U.S.-origin imports. Tariffs on coal and liquefied natural gas (LNG) will be raised to 15%, while tariffs on crude oil, agricultural machinery, large-displacement vehicles, and pickup trucks will be increased to 10%.
Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 1.9% for this week. Our Hong Kong Model Portfolio rose by 7.6% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 614.3% vs. a 5.3% up for the Hang Seng.
The best performer in our Hong Kong 33 was AAC TECH(02018), it’s a global supplier of comprehensive solutions for the latest and most advanced micro technology components. The stock gained 15.0% this week. EPS rating stands at 86, RS rating of 95, and A/D rating of A+.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the market’s rally this week allowed the Hang Seng Index to successfully break through the resistance level formed by the December 2024 high. Additionally, the 5-D, 21-D, 50-D, and 200-D MA are in a bullish alignment, indicating that the market is in an upward trend. The weekly trading volume was significantly higher than the 10-week average, suggesting active market participation. The short-term support is at the 5-day moving average, with secondary support at the gap formed on February 4. The resistance is focused on the November 2024 high. Overall, driven by multiple favorable factors, the Hong Kong stock market showed strong performance this week, with the technology sector’s outstanding performance further boosting investor confidence. However, attention should still be given to the potential for a short-term technical pullback, and caution is advised. Investors are recommended to remain calm and rational, avoid following the crowd blindly, and focus on stocks with strong fundamentals and technicals to navigate market fluctuations with a prudent strategy.
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published on February 7, 2025