Hang Seng fell 1.6%
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This week, the Hong Kong stock market failed to extend its upward momentum and instead traded in a volatile pullback. For the week, both the Hang Seng Index(HSI) and the Hang Seng Tech Index(HSTECH) declined 1.6%.
Market sentiment shifted repeatedly under the influence of multiple factors. At the beginning of the week, sentiment turned cautious and the broader market came under pressure as policy expectations fell short and super typhoon “Ragasa” disrupted South China. By midweek, however, the market staged a turnaround as signs of easing geopolitical tensions boosted risk appetite, while positive news such as breakthroughs in domestic lithography machine technology spurred strength in AI and semiconductor stocks, collectively driving a sharp rebound.
Toward the weekend, market conditions took a sudden turn. On the one hand, U.S. President Trump announced a 100% tariff on branded and patented pharmaceuticals effective October 1, triggering a broad sell-off in biotech names. In addition, heavyweight tech stock Xiaomi Group slumped more than 8% following its new product launch, dragging down the entire technology sector. Meanwhile, investors preferred to take profits ahead of the weekend, further amplifying the downward pressure on the market.
In the U.S. stock market, as of Thursday this week, equities pulled back, showing early strength faded into a pullback. The S & P 500 Index(0S&P5) fell 0.9%, the Nasdaq Composite(0NDQC) dropped 1.1%, and the Dow Jones Indus Actual(0DJIA) declined 0.8%. Despite the retreat, all three major indexes still notched fresh record highs midweek.
On the macroeconomic front, preliminary data from the Bureau of Economic Analysis showed that U.S. Q2 real GDP grew at an annualized q/q rate of 3.8%, above both expectations and the prior reading. Core PCE rose at an annualized q/q rate of 2.6%, also higher than forecast and the previous value. S&P Global data indicated that the U.S. Markit Manufacturing PMI (flash) for September hit a two-month low, while the Services PMI and Composite PMI (flash) both fell to three-month lows, pointing to softer momentum. Specifically, the Manufacturing PMI flash came in at 52, below expectations and the prior reading; the Services PMI flash registered 53.9, also below expectations and prior; and the Composite PMI flash was 53.6, likewise weaker than expected.
In the labor market, Department of Labor data showed that for the week ending September 20, initial jobless claims fell by 14,000 to 218,000, the lowest level since July and well below the Bloomberg consensus estimate of 233,000. While initial claims hit a fresh low since July, continuing claims held above the key 1.9 million level, with the prior week’s revised figure steady at 1.93 million. Labor supply and demand are both moderating, and Fed Chair Powell highlighted that rising concerns over the labor market were the primary reason for the Fed’s first rate cut this year.
On interest rates, CME FedWatch data showed that as of September 25, markets were pricing in an 87.7% probability of a 25bps rate cut in October, slightly down from a week earlier. The probability of a 25bps cut in December dropped to 61.9%, compared with 82.1% a week ago.
On tariffs, the Trump administration issued an official notice implementing the U.S.-EU trade agreement, confirming the imposition of a 15% tariff on EU-imported cars and automotive products effective August 1, consolidating the framework deal reached nearly two months earlier. The document also specified tariff exemptions for certain pharmaceutical compounds, aircraft components, and other goods. Meanwhile, Trump also announced that, starting October 1, a 100% tariff will be imposed on branded and patented pharmaceuticals, with exemptions granted to companies that have already initiated pharmaceutical plant construction in the U.S. The tariff adjustments further extend to heavy-duty trucks (25%), kitchen and bathroom cabinets (50%), and upholstered furniture (30%).
In the A-shares market, equities advanced in a choppy uptrend this week. The CSI 300(000300) gained 1.1%, hitting a new year-to-date high and marking the strongest level in nearly three years. Trading activity remained robust, with average daily turnover in Shanghai and Shenzhen exceeding RMB 2 trillion, though slightly below last week’s levels, reflecting a more cautious sentiment as the index approached key resistance. Sector rotation accelerated: technology and growth shares pulled back after an early-week rally, while defensive sectors such as oil & petrochemicals, defense, and wind power strengthened in the latter part of the week, signaling a shift from offensive trades toward more resilient assets.
On interest rates, the People’s Bank of China authorized the National Interbank Funding Center to release the Loan Prime Rate (LPR) on September 22, 2025. The 1-year LPR stood at 3.0% and the 5-year-plus LPR at 3.5%, both unchanged for the fourth consecutive month. Analysts noted that the PBoC may launch a new round of rate cuts and reserve requirement reductions around the start of Q4, which would likely trigger corresponding LPR adjustments across both tenors.
Elsewhere, the Ministry of Commerce announced that three U.S. entities, including Flat Earth Management, have been added to the export control list, prohibiting the export of dual-use items to them. Additionally, three U.S. entities involved in arms sales to Taiwan, including Alcon, were added to the Unreliable Entity List, restricting them from engaging in China-related import/export activities or making new investments in the country.
Leading stocks advanced this week. The average stock in the MarketSmith Hong Kong 33 rose by 0.2% for this week. Our Hong Kong Model Portfolio rose by 0.7% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 1030.0% vs. a 28.0% up for the Hang Seng.
The best performer in our Hong Kong 33 was CHANJET(01588), it’s a leading provider of financial, tax, and business cloud services for small and micro enterprises in China. The stock gained 27.1% this week. EPS rating stands at 85, RS rating of 87, and A/D rating of B.
Our Hong Kong Market Status are in a Confirmed Uptrend.
From a technical perspective, the Hang Seng Index traded in a sideways consolidation along its 5-DMA this week. It closed slightly below the 5-DMA on Friday but found support at the 21-DMA. In terms of volume, weekly turnover edged down slightly on a w/w basis. On the support side, the 21-DMA serves as a key near-term floor, while on the resistance side, last week’s high of 27,058.03 remains the critical ceiling.
On the flows side, the Southbound inflow via the HK-China Stock Connect continued, totaling HK$43.959 billion for the week, an increase from the prior week, marking the 19th consecutive week of net inflows. YTD, cumulative inflows have reached HK$1.153689 trillion.
Overall, this week’s pullback in Hong Kong equities reflected the combined impact of external policy shocks, internal technical consolidation, and short-term event-driven factors. Despite the pressure, sustained and sizable Southbound inflows underscore long-term investors’ confidence in Hong Kong’s valuation advantage, with volatility being used as an opportunity to accumulate positions. In the short term, Hong Kong equities may remain susceptible to external uncertainties, but the Fed’s rate-cutting cycle and the structural growth trend in AI provide a high degree of medium- to long-term visibility. After sufficient consolidation, Hong Kong’s valuation appeal is likely to attract additional capital, with the foundation for a medium- to long-term upward trajectory still intact.
At this stage, investors are advised to stay calm and rational, avoid chasing rallies, and prioritize stocks with earnings above expectations and constructive technical setups, adopting a balanced strategy to navigate near-term volatility.
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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 September 26, 2025