Hang Seng fell 3.5%
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This week, the Hang Seng Index fell 3.5%, and the Hang Seng Tech Index dropped 3.2%. In the absence of strong positive catalysts, the market was overwhelmed by negative news, with the Hang Seng Index exhibiting a downward trend amid volatility. The U.S. Department of Defense’s 1260H list (CMC List) and the Office of the United States Trade Representative’s 2024 Notorious Markets List for Counterfeiting and Piracy dealt significant blows to market sentiment in Hong Kong. Additionally, uncertainties surrounding Trump’s policy outlook further fueled market volatility. For instance, midweek reports suggested that Trump’s team was considering a more targeted tariff approach instead of a broad-based one, which initially appeared to be positive news. However, Trump quickly refuted these claims as false, triggering another market selloff. More concerningly, Trump publicly stated that he did not rule out using military or economic means to seize the Panama Canal or Greenland, exacerbating fears of geopolitical risks. Adding to the tension, reports indicated that the Biden administration plans to impose a new round of export restrictions on AI chips made by companies like NVIDIA before leaving office. While there were some positive signals from mainland China, such as the People’s Bank of China emphasizing at its 2025 work meeting the implementation of moderately loose monetary policies, including targeted reserve requirement ratio and interest rate cuts to maintain ample liquidity and support stable economic growth, and the National Development and Reform Commission and Ministry of Finance announcing expanded support for the trade-in of consumer goods with a pre-allocated budget of RMB 81 billion to further stimulate domestic demand, market expectations for the effectiveness of these policies remained cautious. As a result, their short-term impact on market sentiment was limited.
This week, the U.S. stock market was closed for one day due to a national day of mourning. The S&P 500 fell 0.41%, briefly breaking above its 50-DMA but failing to hold this critical support level. The Nasdaq declined 0.7%, finding some support near its 50-DMA, while the Dow Jones Industrial Average edged down 0.2%, continuing to oscillate below the 50-DMA. ISM data showed that the U.S. December ISM Manufacturing Index rose to 49.3, exceeding expectations and the previous reading, marking a nine-month high, though it remained in contraction territory. While the manufacturing sector continues to struggle, signs of improvement are evident. Meanwhile, the ISM Services PMI increased to 54.1 in December, above both expectations and the prior reading, indicating accelerated growth in the services sector and stronger business activity. At the same time, data from S&P Global revealed that the final reading of the U.S. December Markit Services PMI was 56.8, the highest since March 2022 (33 months), though it significantly missed expectations and was below the preliminary figure. The U.S. Bureau of Labor Statistics reported 8.098 million job openings in November, according to JOLTS data, far exceeding expectations and the previous month’s figure, continuing the rebound seen in October. However, ADP data showed that December private payrolls increased by just 122,000, falling short of expectations and the prior reading, the lowest level since August, highlighting growing uncertainty in the labor market. On the other hand, the U.S. Department of Labor reported that initial jobless claims for the week ending January 4 dropped to 201,000, below expectations and the prior reading, marking the lowest level since the week of February 17 last year. Meanwhile, continuing claims for the week ending December 28 rose by 33,000 to a seasonally adjusted 1.867 million. Overall, the labor market has shown signs of weakness over the past year, with hiring slowing in several key industries, though it has not yet entered a downward spiral of accelerated layoffs. According to the CME FedWatch Tool, as of January 10, the market assigned a 6.9% probability to a 25-BP rate cut at the Fed’s January meeting, while the probability of maintaining current rates stood at 93.1%.
In the A-share market, the CSI 300 Index declined 0.9%, remaining below its 50-DMA. Trading volume was slightly lower than last week and continued to trail the 50-day average, reflecting an Uptrend Under Pressure. The market moved sideways this week but broke below the support level of 3,765.16, the low from October 18, 2024. The current support level is the gap from September 30, 2024, while resistance is at the 21-DMA, followed by the 50-DMA. Macroeconomic data from S&P Global showed that China’s December 2024 Caixin Services PMI came in at 52.2, exceeding the previous reading and hitting a new high since June 2024, indicating accelerated expansion in service sector activity. However, weighed down by slower manufacturing growth, the December Caixin Composite PMI recorded 51.4, a decline from the prior reading. According to the National Bureau of Statistics, China’s December 2024 CPI rose 0.1% y/y and remained flat m/m; core CPI increased 0.4% y/y, up 0.1 percentage points from the previous month. Meanwhile, PPI fell 0.1% m/m and dropped 2.3% y/y, with the annual decline narrowing by 0.2 percentage points from the prior month. On the policy front, the People’s Bank of China held its 2025 annual work conference on January 3–4, emphasizing the use of various monetary policy tools and adopting reserve requirement ratio (RRR) and interest rate cuts as needed based on domestic and international economic and financial conditions. The central bank aims to maintain ample liquidity and ensure that the scale of social financing and money supply aligns with economic growth and price targets. Additionally, during a routine policy briefing, the National Development and Reform Commission (NDRC) and the Ministry of Finance announced plans to expand the scope of support for trade-in programs for consumer goods in 2025. Central government funding of RMB 810 billion has already been allocated for this initiative. Moreover, the total funding from ultra-long-term special treasury bonds for the “Two New” areas will see a substantial increase compared to last year, with specific figures to be disclosed during the National People’s Congress.
Leading stocks fell this week. The average stock in the MarketSmith Hong Kong 33 fell by 2.7% for this week. Our Hong Kong Model Portfolio fell by 4.5% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 573.9% vs. a 5.0% down for the Hang Seng.
The best performer in our Hong Kong 33 was STELLA HOLDINGS(01836), it’s a leading developer and manufacturer of high-quality footwear and leather products. The stock gained 8.6% this week. EPS rating stands at 97, RS rating of 89, and A/D rating of B+.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the Hang Seng Index has fallen for five consecutive trading days this week, breaking below its November 26, 2024, low. In the short term, it may further test the 19,000-point level. The support level is at the 19,000-point mark, while the resistance level is at the 21-DMA. In terms of moving average distribution, the 5-D, 21-D, and 50-D MA are in a bearish alignment, signaling a negative outlook. As for trading volume, this week’s volume was higher than in previous weeks, slightly surpassing the 50-day average. However, daily trading remained subdued, with volume typically ranging between HKD 120 billion and HKD 200 billion. In terms of the Southbound inflow via the HK-China Stock Connect, there was a net inflow of HKD 48.911 billion this week, continuing the trend of capital inflows and showing a significant increase compared to last week. Overall, before Trump’s return to office, the Hong Kong stock market may continue to be influenced by various uncertainties. At this stage, it is advisable for investors to remain calm and rational, avoid blindly following market trends, and focus on stocks with strong earnings performance and solid technical setups, adopting a cautious investment strategy to navigate market fluctuations.
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published on January 10, 2025