The Hong Kong Stock Market Overall Showing a Pattern Of Choppy Consolidation

Hang Seng raised 1.1%

Editor’s Note: As always, we would appreciate any feedback you have. It will help us make this app more useful to you.

This week, the Hang Seng Index(HSI) rose 1.1%, while the Hang Seng Tech Index(HSTECH) declined 0.7%, with the Hong Kong stock market overall showing a pattern of choppy consolidation.

Despite several major bearish developments from the U.S. over the weekend—most notably Moody’s downgrade of the U.S. credit rating to Aa1, which sparked investor concerns over the long-term health of U.S. public finances—the Hong Kong market demonstrated resilience. Although the market slipped 0.1% on Monday, it followed a low-open, high-close pattern, underscoring its ability to withstand pressure. On Tuesday, boosted by the implementation of rate cuts and supportive policy signals, the Hang Seng Index surged 1.5%.

However, sentiment later turned volatile. Weighed down by intensified U.S. Treasury sell-offs and a more complex global landscape, market confidence became increasingly cautious. Capital flowed into safe-haven assets such as Bitcoin and gold, putting pressure on overall equity market performance.

In the U.S. stock market, as of Thursday this week, the S & P 500 Index(0S&P5) declined 2.0%, the Nasdaq Composite(0NDQC) was down 1.5%, and the Dow Jones Indus Actual(0DJIA) dropped 1.9%.

On the news front, Moody’s downgraded the U.S. credit rating from the top-tier Aaa to Aa1 due to the country’s rising government debt, while revising the outlook from “negative” to “stable.” This symbolic move has raised doubts about the U.S.’s status as the world’s most creditworthy sovereign borrower. Previously, both S&P Global and Fitch had also downgraded the U.S. credit rating—completing a full set of downgrades by the three major rating agencies. In addition, the U.S. House of Representatives narrowly passed the “One Big Beautiful Bill Act,” which includes provisions to extend the 2017 tax cuts, eliminate the Biden administration’s green energy subsidies, and increase defense spending. The bill triggered a broad sell-off in solar and new energy stocks.

On the macro front, data from S&P Global showed that the preliminary U.S. Markit Manufacturing PMI for May came in at 52.3, a three-month high, beating both expectations and the previous reading; the Services PMI also rose to 52.3, a two-month high and likewise stronger than expected; the Composite PMI posted 52.1, also topping forecasts and prior levels. New orders grew at the fastest pace in over a year, price indicators climbed to their highest level in nearly three years, manufacturing export orders declined for a second straight month, and employment metrics showed signs of softening.

In the labor market, the U.S. Department of Labor reported that for the week ending May 17, initial jobless claims dropped by 2,000 to 227,000, the lowest level in four weeks, suggesting that despite uncertainty from trade policy, the job market remains resilient. Meanwhile, continuing claims for the week ending May 10 rose by 36,000 to 1.903 million.

In the A-share market, the CSI 300(000300) fell 0.2% this week, showing a “down first, then up” pattern as it rebounded steadily after testing the 100-DMA. Trading volume remained subdued, with daily turnover consistently below the 50-day average. The market is currently in a rally attempt phase, with the 100-DMA acting as technical support and the 4,000-point level serving as an overhead resistance.

On the economic front, data from the National Bureau of Statistics showed that in April, industrial output for large-scale enterprises rose 6.1% y/y, the service production index grew 6.0%, and total retail sales of consumer goods increased by 5.1%. Cumulative data from January to April showed that fixed-asset investment rose 4.0% y/y, or 8.0% if property development investment is excluded. The data also indicated that the surveyed urban unemployment rate stood at 5.1% in April, down 0.1 percentage points from the previous month. Real estate development investment fell 10.3% y/y in the first four months, and the floor area of newly sold commercial housing declined 2.8%. According to housing price data from 70 cities, April prices of new homes in first- and second-tier cities were flat month over month, while those in third-tier cities edged down slightly. y/y price declines narrowed across all tiers of cities.

On the interest rate policy front, the People’s Bank of China authorized the National Interbank Funding Center to publish new loan prime rates (LPR), with the 1-year LPR lowered to 3.00% and the 5-year and above LPR cut to 3.50%, both down by 10 basis points—the first rate cut since last October. This move is expected to effectively lower financing costs for businesses and credit costs for households, thereby boosting market confidence and supporting stable growth in the real economy.

In the precious metals market, customs data showed that China’s gold imports reached 127.5 metric tons in April, a near 11-month high and a 73% increase from the previous month; platinum imports also surged to 11.5 tons, the highest in almost a year.

On the policy front, the China Securities Regulatory Commission (CSRC) released its “Decision on Amending the Administrative Measures for the Major Asset Restructuring of Listed Companies.” The revised measures introduce several breakthrough mechanisms: the establishment of a streamlined review process, adjustments to regulatory rules on share issuance for asset purchases, the introduction of an installment payment system, and a reverse-linked incentive mechanism involving private equity funds. This round of regulatory upgrades, as a fundamental reform in the field of mergers and acquisitions for listed companies, will significantly boost market participation confidence, reinvigorate M&A activity, and help listed firms pursue high-quality development.

Leading stocks raised this week. The average stock in the MarketSmith Hong Kong 33 rose by 2.3% for this week. Our Hong Kong Model Portfolio rose by 2.3% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 796.5% vs. a 17.6% up for the Hang Seng.

The best performer in our Hong Kong 33 was LAUNCH TECH(02488), it’s one of the earliest high-tech enterprises in China dedicated to automotive diagnosis, testing, maintenance, and tire equipment research and development and production. The stock gained 10.3% this week. EPS rating stands at 98, RS rating of 97, and A/D rating of A+.

Our Hong Kong Market Status are in a Confirmed Uptrend.

From a technical perspective, the Hong Kong stock market extended last week’s choppy trend, facing some resistance around the 24,000-point psychological level. Trading volume continued to shrink, with all five trading days this week recording daily turnover below the 50-DMA. In the short term, support remains at the 50-DMA, while resistance is seen at the 24,000-point level above.

As for the Southbound inflow via the HK-China Stock Connect, there was a notable rebound this week with a net inflow of HK$18.959 billion, significantly higher than last week.

Overall, despite external uncertainties—particularly the sell-off in U.S. Treasuries and rising geopolitical risks—the Hong Kong market has shown strong resilience and rebound potential, backed by policy support. If the index can effectively break above the 24,000-point barrier, it could unlock further upside room. Meanwhile, the continued Southbound inflows provide solid support for the market.

At this stage, investors are advised to remain calm and rational, avoid chasing rallies blindly, and focus on stocks with earnings that beat expectations and sound technical setups, adopting a prudent yet flexible approach to navigate market fluctuations.

What do you think? Please email us any questions or comments.

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.