Hang Seng fell 1.0%
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This week, the Hong Kong market was closed on Wednesday for the Double Ninth Festival, and during the remaining four trading days, the market generally showed a rise followed by a pullback. The Hang Seng Index(HSI) and Hang Seng Tech Index(HSTECH) fell 1.0% and 2.5%, respectively.
Market movements this week were primarily driven by China-U.S. talks. On Monday, optimism dominated as positive signals from the talks and supportive macro data boosted confidence. However, investors subsequently took profits ahead of the leaders’ meeting. After the summit, the absence of a traditional joint press conference led some market participants to misinterpret the outcome as “below expectations.” Although positive results were later announced, concerns emerged that the measures were mostly “pauses” or “delays” rather than permanent solutions. Combined with worries about potential new frictions before the U.S. president’s planned visit to China in April next year, market sentiment turned cautious.
In the U.S. stock market, as of Thursday this week, the three major U.S. indices extended last week’s gains but experienced an overall intraday pullback, retreating after hitting record highs. The S & P 500 Index(0S&P5) rose 0.5%, the Nasdaq Composite(0NDQC) gained 1.6%, and the Dow Jones Indus Actual(0DJIA) increased 0.7%.
On the macro front, the U.S. Bureau of Labor Statistics reported that CPI in September rose 3% y/y, below expectations but above the previous reading, marking the highest y/y increase since January 2025; on a m/m basis, CPI increased 0.3%, below both forecasts and the prior month. Core CPI rose 3% y/y, below expectations and prior reading, hitting the lowest level since June; m/m growth was 0.2%, also below expectations and prior month. S&P Global reported that the preliminary October Markit Manufacturing PMI was 52.2, Services PMI 55.2, and Composite PMI 54.8, all up from September and above expectations. The new orders composite index reached its highest level of the year, manufacturing orders posted the strongest reading since February 2023, and services new business saw its largest increase since the end of 2024.
On the rates front, following the FOMC meeting, the Fed announced a 25-BP cut to the target range for the federal funds rate, lowering it from 4.00%-4.25% to 3.75%-4.00%, marking the second rate cut this year, and stated it will end balance sheet runoff starting December 1. Chair Powell noted that a December rate cut is not yet certain; inflation is near target, the labor market is cooling, and current monetary policy remains tight. CME FedWatch Tool shows that as of October 30, the market-implied probability of a 25 BP cut in December is 73.7%, down from 91.1% a week earlier.
On the employment front, ADP, known as the “small nonfarm payrolls,” launched weekly employment data, representing a major adjustment to its labor reporting mechanism in nearly 20 years. The initial report indicated that in the four weeks ending October 11, 2025, U.S. private sector employment increased by an average of 14,250 jobs.
In the A-shares market, the market rose initially this week but then gave up gains, with the CSI 300(000300) ending the week down 0.4% in total. In terms of volume, turnover slightly expanded compared with last week, with three trading days recording average daily volume slightly above the 50-day avg. daily volume line. Daily turnover in both the Shanghai and Shenzhen markets remained above CNY 2tn. Capital allocation focused on the most certain directions, primarily targeting high-quality growth stocks centered on “15th Five-Year Plan” industrial themes.
On trade and economy, the outcomes of the China-U.S. economic and trade consultations in Kuala Lumpur were announced. The U.S. will remove the 10% so-called “fentanyl tariff” on Chinese goods and continue to suspend the 24% reciprocal tariffs on Chinese goods for another year. Meanwhile, the U.S. will also suspend for one year the implementation of the 50% “penetration rule” export controls and the Section 301 measures on China’s maritime, logistics, and shipbuilding sectors. China will correspondingly adjust or suspend relevant countermeasures. In addition, the two leaders recently met in Busan, where their economic and trade teams exchanged in-depth views on key issues and reached consensus. Both teams will work to quickly detail and implement follow-up measures to ensure the consensus is put into practice, injecting confidence into both the China-U.S. relationship and the global economy.
On macro data, the National Bureau of Statistics reported that profits of China’s industrial enterprises above designated size rose 21.6% y/y in September, accelerating 1.2 ppts from August and marking two consecutive months of growth above 20%. High-tech manufacturing and equipment manufacturing, among other new-type productive sectors, grew rapidly, while profits of private and foreign-funded enterprises accelerated significantly.
On policy, five ministries including the Ministry of Finance and Ministry of Commerce issued the “Notice on Improving Duty-Free Shop Policies to Support Consumption,” clarifying that duty-free shop policies will be improved from Nov 1, 2025. The aim is to further leverage duty-free policies to boost consumption, guide the repatriation of overseas spending, attract foreign visitors’ spending, and promote healthy and orderly development of duty-free retail.
Regarding A-shares Q3 earnings, as of the morning of Oct 31, 5,437 of 5,444 listed A-share companies had released their 2025 Q3 reports. Total revenue for the first three quarters reached CNY 53.41tn, up 1.20% y/y; net profit attributable to shareholders was CNY 4.70tn, up 5.34% y/y. Profitability improved significantly in Q3, with net profit growth reaching 11.30%, rebounding 10.19 ppts from Q2.
Leading stocks declined this week. The average stock in the MarketSmith Hong Kong 33 fell by 0.2% for this week. Our Hong Kong Model Portfolio fell by 1.8% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 1014.0% vs. a 27.0% up for the Hang Seng.
The best performer in our Hong Kong 33 was HOME CONTROL(01747), it’s a global home control solutions provider headquartered in Singapore, formerly known as Philips Home Control Division.. The stock gained 32.3% this week. EPS rating stands at 74, RS rating of 99, and A/D rating of A.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the market broke below two key moving averages—the 21-day and 50-day MAs—on Thursday and Friday, as well as the 26,000-point psychological level, leading to cautious and wait-and-see sentiment. In terms of volume, aside from Thursday’s turnover slightly exceeding the 50-day avg. daily volume, trading on other days remained below the 50-day avg., reflecting strong market caution. On the support side, the 100-day MA serves as a key short-term defense level, while the October 2 high of 27,381.84 points forms significant resistance.
Regarding the Southbound inflows via the HK-China Stock Connect, the week saw a cumulative net inflow of HKD 27.492bn, larger than last week, marking the 24th consecutive week of net inflows. YTD, net inflows have consistently hit record highs.
Overall, this week’s core focus in the Hong Kong market remained on China-U.S. relations, with investor sentiment moving from optimism and anticipation to caution, followed by a re-evaluation after expectations were priced in. Short-term volatility may be unavoidable, but the relatively low valuations of the Hong Kong market and positive policy expectations provide some support. Coupled with continued Southbound net inflows, there is clear evidence of long-term allocation demand from Mainland investors for undervalued Hong Kong assets. Aligned with “15th Five-Year Plan” industrial themes, the tech sector and high-end manufacturing with strong growth potential still hold strategic allocation value over the medium to long term.
At this stage, investors are advised to remain calm and rational, avoid chasing short-term gains blindly, and prioritize stocks with earnings above expectations and solid technical setups, adopting a flexible yet prudent approach to 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 October 31, 2025