Hang Seng Falls 0.42%
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The Hang Seng Index(HSI) declined modestly by -0.42% this week, while the Hang Seng TECH Index(HSTECH) fell -0.43%. Hong Kong equities showed overall weakness, primarily weighed down by heightened market divergence over the Fed’s 2026 rate-cut trajectory following its December policy meeting, and by lackluster property sales data despite recent policy clarifications in mainland China. China’s November CPI rose 0.7% year-over-year—the highest since March 2024—while PPI remained down 2.2% YoY, indicating mild domestic demand recovery but persistent industrial deflationary pressures. International institutions such as the World Bank and IMF have raised their 2025 China GDP growth forecasts to 4.9% and 5.0%, respectively, providing a valuation floor for Hong Kong stocks, though strong upward momentum remains absent.
Notably, the policy environment surrounding the Hong Kong market is undergoing structural optimization. The Central Economic Work Conference explicitly designated “prioritizing domestic demand” as the top task for 2026, accompanied by “a more proactive fiscal policy” and “an appropriately accommodative monetary policy,” offering medium-term support to mainland China-linked sectors listed in Hong Kong. Specifically in real estate, policy language has evolved from the previous “ensuring project delivery” to a more comprehensive framework of “tailored city-level measures to control new supply, reduce inventory, and optimize housing supply.” For the first time, local governments are explicitly encouraged to purchase existing commercial housing units for conversion into subsidized housing, creating an asset conversion channel between commercial and public housing. If effectively implemented, this mechanism could significantly ease developers’ inventory burdens and indirectly improve banks’ risk exposure to property-related loans, thereby benefiting mainland China-focused property stocks and the financial sector. Additionally, the conference called for “deepening reforms to the housing provident fund system,” with anticipated optimizations in contribution ratios and withdrawal conditions to further unlock legitimate housing demand.
On the capital markets front, Beijing has rolled out its “comprehensive reform of investment and financing in capital markets” for the second consecutive year, emphasizing “enhancing inclusiveness of the multi-tiered market system,” “advancing mutual fund reforms,” and “building a long-term investment ecosystem.” In parallel, HKEX has strengthened IPO quality oversight and launched the “Tech 100 Index,” covering emerging productivity sectors such as AI, biotech, and electric vehicles. E Fund is set to issue a related ETF soon. These moves not only enhance Hong Kong’s appeal to global long-term capital but also provide clearer allocation anchors for southbound investors. However, policy transmission takes time, and current Hong Kong investors remain more focused on tangible improvements in sales data and corporate cash flows rather than policy rhetoric alone.
At the sector level, the top-performing Hong Kong industry groups were Finance-Consumer Loans(G6148IG.HK), up 7.51% for the week; Bldg-Wood Prds(G2400IG.HK), up 6.69%; and Food-Meat Products(G2010IG.HK), up 3.72%. WH Group(00288), part of the Food–Meat Products sector (industry rank 27, indicating strength), gained 4.43% on expectations of supportive consumption policies. In contrast, the tech sector was dragged down by Oracle’s disappointing earnings and AI regulatory concerns. Although HSTECH trading volume was slightly above its 50-day average (+5.48%), it failed to break above the 50-day moving average (currently trading 4.11% below it).
In U.S. markets, the Dow Jones Indus Actual(0DJIA)rose 1.56% this week, nearing record highs; the S & P 500 Index(0S&P5) edged up 0.45%; and the Nasdaq Composite(0NDQC) gained just 0.07%.
Market performance was markedly divergent: small caps and traditional blue chips led gains, while mega-cap tech stocks came under pressure. Oracle plunged 11% due to weak cloud performance and surging capital expenditures, dragging down AI-related names like NVIDIA. Although OpenAI’s release of GPT-5.2 boosted AI sentiment, Alphabet fell 2.43%, reflecting investor skepticism about profit realization among high-valuation tech firms. Following the Fed’s rate cut, 2-year Treasury yields dropped sharply by over 7.6 basis points, while 10-year yields ticked up slightly—highlighting concerns over long-term inflation and fiscal deficits. CICC expects another Fed rate cut in March 2026, whereas Standard Chartered’s Ding Shuang argues the U.S. may be “out of room to cut,” increasing policy path uncertainty.
From a macro perspective, the Fed announced its third 25-basis-point rate cut of the year on December 10, lowering the federal funds rate ceiling to 3.75% and initiating a short-term Treasury purchase program—interpreted by markets as “QE without calling it QE.” Chair Powell’s dovish tone pushed the dollar index down to around 98, while offshore RMB briefly broke below 7.05, hitting a 14-month high. However, U.S. initial jobless claims unexpectedly jumped to 236,000 (from 192,000), signaling marginal labor market softening and dampening risk appetite. Meanwhile, China’s November CPI rose 0.7% YoY (highest since March 2024), and PPI remained down 2.2% YoY—reaffirming modest demand recovery amid lingering industrial deflation. The World Bank and IMF have revised 2025 China GDP growth forecasts upward to 4.9% and 5.0%, respectively.
On the A-share front, the CSI 300(000300)slipped -0.08% this week, with slightly higher trading volume. S
ector rotation was intense: computing power and brokerages surged on Monday; real estate rallied midweek (with Vanke A hitting limit-up); and commercial aerospace and Moore Threads (which posted weekly gains exceeding 15%) gained traction on Friday—but no sustained leadership emerged. Policy tailwinds were abundant: the Central Economic Work Conference placed “domestic demand-led growth” at the top of its eight key tasks and pledged “more proactive and effective macro policies” and “appropriately accommodative monetary policy.” ZhongOu Fund expects further increases in special-purpose bonds and extraordinary treasury issuance in 2026. However, November passenger vehicle sales fell 8.5% YoY (gasoline vehicles down 22%), revealing fragile consumer recovery. Moreover, Moore Threads warned of an expected net loss of RMB 730 million to RMB 11.68 billion in 2025, underscoring that hard-tech firms remain in heavy investment phases, with profitability still distant.
The HK33 index declined an average of -0.87% this week (13 gainers vs. 20 decliners), underperforming the HSI. Top gainers included LUYUAN GP HLDG(02451) up +8.19%, GOFINTECH QUANT(00290) up +6.99%, and WH Group(00288)up +4.43%. Notably, although Luyuan boasts a high Relative Strength Rating of 89, its industry—Automobile Manufacturers—is ranked 152 (weak), raising sustainability concerns. In contrast, Guofu Quantum belongs to the Finance–Investment Banking sector (rank 47, near preferred range) and has an EPS Rating of 84, indicating stronger fundamentals. The model portfolio rose 1.17% against the market trend, driven by China Foods(00506), which surged 14.87%. China Foods holds an EPS Rating of 88 and an Accumulation/Distribution Rating of B; although its Beverages–Non-Alcoholic industry is ranked 115, it benefits from domestic demand policy expectations.
Technically, the HSI closed at 25,976.79—slightly above its 5-day (+1.28%) and 10-day (+0.62%) moving averages but 0.53% below its 50-day MA. The 200-day MA remains a solid support level (+5.56%). Volume has been steady over five sessions, though the latest day’s volume was 10.06% below the 50-day average, reflecting cautious sentiment. Near-term support lies at 25,500 (recent consolidation zone), with resistance at 27,000 (close to the one-year high of 27,381.84). The HSTECH significantly underperformed, trading 4.11% below its 50-day MA; without a breakout above 5,800 on strong volume, it may remain range-bound.
Southbound capital flows turned net negative this week, totaling -HK$3.443 billion, a sharp reversal from last week’s +HK$11.349 billion inflow. On December 12 alone, net selling reached HK$5.287 billion, suggesting mainland investors are taking profits after the Fed’s policy shift and rapid RMB appreciation.
In summary, global markets have entered a policy observation phase following the Fed’s initiation of its easing cycle. Hong Kong equities face near-term headwinds from the pace of domestic demand recovery and real estate risk resolution, limiting trend-driven opportunities—but high-dividend and policy-beneficiary sectors (e.g., subsidized housing, AI applications) offer structural prospects. The Dow’s record highs reflect U.S. economic resilience, while Nasdaq stagnation warns of stretched tech valuations. A-shares benefit from clear policy support in the opening year of the “Fifteenth Five-Year Plan,” yet await concrete improvements in corporate earnings and consumer confidence.
At this stage, investors are advised to remain calm and rational, avoid chasing rallies blindly, and prioritize stocks with earnings beats and robust technical patterns—adopting a disciplined strategy to navigate market volatility.
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published on December 12, 2025