Hang Seng fell 4.0%
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This week, the Hong Kong stock market showed overall weakness, continuing its adjustment trend. The Hang Seng Index(HSI) fell 4.0% for the week, while the Hang Seng Tech Index(HSTECH) underperformed, dropping 8.0%.
The main driver of the market adjustment was the escalation of U.S.-China trade tensions. Trump announced plans to impose high tariffs on China and implement export controls on key software, raising global investor concerns about the pace of economic recovery. In addition, the U.S. regional banking credit crisis intensified, dragging down overnight U.S. equities and putting further pressure on sentiment in Hong Kong. Ongoing U.S. government shutdown risks delayed the release of core economic data, further increasing market uncertainty. Coupled with a broad sell-off in the cryptocurrency market, global risk appetite weakened, delivering a double hit to Hong Kong tech stocks and crypto-related stocks.
In the U.S. stock market, despite a sharp sell-off last Friday, the U.S. stock market has generally remained resilient through Thursday this week. The S & P 500 Index(0S&P5) rose 1.2%, the Nasdaq Composite(0NDQC) gained 1.6%, and the Dow Jones Indus Actual(0DJIA) advanced 1.0%.
Due to the government shutdown, many federal statistical agencies have delayed or suspended the collection and release of key macroeconomic data, resulting in several important reports not being published as scheduled. With a lack of fresh and reliable data, both policymakers and investors face greater difficulty assessing the trajectory of the economy and inflation. This uncertainty has increased market volatility and led to more cautious sentiment and liquidity conditions.
The latest Beige Book indicated that overall U.S. economic activity was largely unchanged, with only a few districts reporting modest growth. Consumer spending has softened, while manufacturing, agriculture, and transportation remain weak. Some improvement was noted in financial and real estate activities. Labor demand has eased, the job market remains stable, and wage growth is moderate though cost pressures are mounting for businesses. Prices continue to rise, but many sectors have limited ability to pass on higher costs. Firms generally remain cautious about the outlook, citing concerns over weak demand and policy uncertainty.
On interest rates, Fed Chair Jerome Powell signaled earlier this week that the central bank may cut rates later this month. He noted that since officials lowered the benchmark rate in September and projected two more cuts this year, the economic outlook has not changed significantly. Based on futures market pricing, investors are now largely convinced that the Fed will announce a rate cut at its October 28–29 meeting.
On the policy front, the U.S. government announced it will impose an additional 100% tariff on all Chinese imports starting November 1, covering a wide range of products from electronics to machinery — signaling a new round of trade tensions. In addition, beginning October 14, the U.S. started levying an extra port fee on vessels owned or operated by Chinese or Chinese-funded companies, calculated based on net tonnage and scheduled to increase annually.
In the A-shares market, trading was volatile this week, with a slight pullback as the CSI 300(000300) fell 2.2%. On the volume side, trading activity was relatively strong during the first two sessions, with daily turnover exceeding the 50-day average, but it weakened over the next three sessions, falling below the 50-day average and declining each day. Total daily turnover in the Shanghai and Shenzhen markets also trended downward, though it remained above RMB 2 trillion during the first three sessions. Market performance was highly divergent: traditional dividend-paying sectors outperformed, while previously popular growth and tech stocks saw a notable correction. Specifically, banks and coal led the gains, while hardware equipment and semiconductor sectors posted the largest declines.
On the macro front, data from the National Bureau of Statistics showed that China’s CPI rose 0.1% m/m in September but fell 0.3% y/y, while core CPI increased 1% y/y, marking the fifth straight month of acceleration and the first time in 19 months it returned to the 1% level. PPI was flat m/m but fell 2.3% y/y, narrowing by 0.6 ppts from the previous month and improving for the second consecutive month.
In trade, customs data showed that China’s total goods trade in September reached RMB 4.04 trillion, up 8% y/y. Exports rose 8.4% to RMB 2.34 trillion, while imports increased 7.5% to RMB 1.7 trillion—marking the fourth consecutive month of y/y growth in both exports and imports. For Q3, total goods trade rose 6% y/y, extending the streak of eight straight quarters of growth. However, rare earth exports fell for the third consecutive month, down to 4,000.3 tons in September.
In financial indicators, PBoC data showed that M2 grew 8.4% y/y at the end of September, while M1 rose 7.2%, narrowing the M1–M2 gap to the lowest level of the year. In the first three quarters, new RMB loans totaled RMB 14.75 trillion, while total social financing increased RMB 30.09 trillion, up RMB 4.42 trillion y/y. Regarding the “deposit relocation” phenomenon, official commentary explained that it essentially reflects residents’ asset reallocation driven by interest rate dynamics. The rapid rise in non-bank deposits this year mainly stems from the trend toward longer deposit terms and increased holdings of negotiable certificates of deposit by non-bank financial institutions.
On the policy front, China announced countermeasures against U.S. Section 301 restrictions targeting its shipbuilding and related industries, deciding to impose a special port fee on U.S.-related vessels starting October 14. Authorities emphasized that the move aims to safeguard fair competition in the global shipping and shipbuilding markets, describing it as a legitimate self-defense measure, and urged the U.S. to correct its wrongful actions and cease its unreasonable suppression of China’s maritime sector.
Leading stocks declined this week. The average stock in the MarketSmith Hong Kong 33 fell by 4.1% for this week. Our Hong Kong Model Portfolio fell by 4.1% for this week (see details in the Model Portfolio section). Since June 20, 2013, the Hong Kong 33 is up 1008.6% vs. a 23.7% up for the Hang Seng.
The best performer in our Hong Kong 33 was TONGGUAN GOLD(00340), it’s mainly engaged in gold mining business. The stock gained 5.0% this week. EPS rating stands at 98, RS rating of 98, and A/D rating of A+.
Our Hong Kong Market Status are in an Uptrend Under Pressure.
From a technical perspective, the HSI opened sharply lower on Monday, gapping down below the 26,000-point level. In the following trading days, the index oscillated around the 50-DMA but ultimately failed to hold it on Friday, finding support at the 100-DMA. Trading volume on Monday’s plunge was unusually high, second only to the single-day record on April 7. Overall market activity remained robust this week; out of the five trading days, only Thursday’s volume slightly fell below the 50-day average, while the other days remained above. Key support is at the 25,000-point level, with resistance formed by the 50-DMA.
Regarding Southbound inflows via the HK-China Stock Connect, despite the weak market performance, sustained net inflows provided crucial support to Hong Kong stocks. This week, net inflows totaled HKD 45.089 billion, marking the 22nd consecutive week of inflows.
In summary, in the absence of incremental positive catalysts, Hong Kong stocks are likely to continue a range-bound pattern in the short term. However, marginal improvement factors are expected to gradually accumulate, providing momentum for an upward move. From a medium- to long-term perspective, economic fundamentals, continuous Southbound inflows, and liquidity improvement from the Fed’s rate-cut cycle together form a foundation for a sustainable uptrend. Market focus in the coming week will be on U.S.-China trade developments, third-quarter earnings results, and global central bank policy actions. The implementation of U.S. tariff measures on November 1 will be a key observation point, while a potential meeting between the Chinese and U.S. heads of state at the APEC summit in mid-November will also draw attention.
At this stage, investors are advised to remain calm and rational, avoid blind chasing of rallies, and prioritize stocks with better-than-expected earnings and solid technical patterns, adopting a flexible and steady approach to navigate market 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 October 17, 2025