The Fed raises interest rates for the first time in three years! How will the market react?
Hang Seng Index declines; Fed's hawkish stance rattles global market sentiment [Ping An Asset Management (Hong Kong) Market Weekly]
NVIDIA's strong earnings report briefly boosted the market last week, but Fed Chair Powell's hawkish debut at the Jackson Hole symposium on Friday heightened expectations for rate hikes, significantly shaking global equity sentiment. The Hong Kong stock market was weighed down by Alibaba's HK$80 billion discounted share placement, with the tech sector facing collective pressure. The Hang Seng Index closed at 25,584.79 points on Friday, down 1.63% from the previous week.
The A-share market remained stable last week. The CSI 300 Index closed at 4,609.18 points on Friday, edging down 0.21% for the week; the CSI 500 Index closed at 7,895.45 points, rising 0.52% for the week; and the CSI 1000 Index closed at 7,705.03 points, up 1.36%.
The Nasdaq Composite closed at 29,641.56 last Friday, up 1.14% for the week. The S&P 500 Index closed at 7,711.76 on Friday, rising slightly by 0.49% compared to the previous week. The Hang Seng Tech Index closed at 4,605.15 points last Friday, plunging 3.38% for the week, while the Wind Technology Select HKD Net Total Return Index closed at 4,070.25 points, up 0.39% for the week.
Hong Kong dividend assets demonstrated resilience amid market volatility. The CSI Hong Kong Dividend Index closed at 4,061.39 points, down 0.12% for the week. The Solactive Global Pacific Select Stocks HKD Net Return Index closed at 2,127.90 points on Friday, up 0.65% for the week.
The money market remained stable, with the latest quote for the U.S. Secured Overnight Financing Rate (SOFR) at 3.64%.
Key market events:
The growth rate of profits for Chinese industrial enterprises slowed for the third consecutive month. The People's Daily published a series of articles defending the economy, arguing against excessive focus on short-term fluctuations.
The US is reportedly planning to impose a 7.5% tariff on Chinese goods citing overcapacity. China stated it is closely monitoring developments and reserves the right to take countermeasures. During a meeting with the US Ambassador to China, Foreign Minister Wang Yi noted that China-US relations still face risks and challenges. The US-Canada trade dispute intensified as Canadian Prime Minister Carney launched reciprocal counterattacks, imposing a 50% tariff on approximately $20 billion worth of US goods including furniture, steel, and aluminum. The Trump administration is reportedly considering escalating trade penalties against Canada. US Treasury Secretary Bessent announced a plan for the economic isolation of Iran, urging countries to cut commercial ties with Tehran. The US Treasury sanctioned numerous individuals and entities linked to Iran, involving dozens of mainland Chinese and Hong Kong entities, but excluding major Chinese-funded financial institutions.
The US core PCE price index showed moderate performance, but Federal Reserve officials remain divided on the inflation outlook. Market attention is focused on Waller's debut at the Jackson Hole symposium on Friday, which will also serve as a test of his low-profile communication style.
The Bank of Japan's core inflation indicator remains above the target level, with Deputy Governor Hichino expressing openness to a rate hike in September. Minutes from the European Central Bank meeting showed officials discussed the necessity of adopting a 'moderately restrictive' monetary policy. The IMF Managing Director called on central banks worldwide to continue focusing on fighting inflation. A Japanese parliamentary delegation visited China, marking a tentative step toward restoring political contact after relations hit a freezing point due to Sanae Takaichi's remarks on Taiwan.
Russia is reportedly viewing peace negotiations as having reached a dead end and is preparing to escalate the war in Ukraine. South Korea stated that the US has postponed the 'Double Dragon' joint military exercises between the two countries, citing the situation in the Middle East.
For the week, the Hang Seng Index fell 1.63%. By sector, energy contributed most to the index, while consumer discretionary dragged it down the most. Southbound capital recorded a net inflow of HK$9.8 billion this week.
Key economic data:
On Friday, data for January-July showed that operating revenue of industrial enterprises above designated size increased by 6.5% year-on-year, driving a 17.6% year-on-year increase in profits for these enterprises.
On Thursday, data released by the US Census Bureau on August 27 showed that the preliminary goods trade deficit for July widened to $118.8 billion, compared to $101.4 billion in the previous month.
On Thursday, the advance US goods trade balance for July showed a deficit of $118.8 billion, versus an estimate of a $100.5 billion deficit and a previous value of a $101.4 billion deficit.
On Thursday, the initial estimate for US wholesale inventories in July rose by 1.3%, exceeding the expected increase of 0.2%.
On Thursday, data showed that from January to July, industrial enterprises above designated size nationwide reported a total profit of RMB 4.58206 trillion, a year-on-year increase of 17.6%.
On Wednesday, the revised annualized quarterly growth rate for US real GDP in the second quarter stood at 1.5%, in line with the forecast of 1.5% and unchanged from the previous value of 1.5%.
On Wednesday, the initial estimate for US durable goods orders in July rose by 1.1% month-on-month, beating the forecasted increase of 0.5%.
On Wednesday, US personal spending increased by 0.2% month-on-month in July, higher than the estimated 0.1%, compared to the previous value of 0.3%.
On Tuesday, the US Conference Board Consumer Confidence Index for August came in at 89.4, below the expected 90.2, while the previous value was revised down from 90.8 to 90.2.
On Tuesday, the FHFA House Price Index for June rose by 2.3% year-on-year, with the previous value revised up from 2.2% to 2.4%.
On Tuesday, August 25, news reported that the Philadelphia Fed's non-manufacturing index for August stood at -10.6.
On Tuesday, ADP data showed that over the four weeks ending August 8, private sector jobs in the US increased by an average of 11,750 per week.
On Tuesday, the revised figure for US building permits in July showed a 4.3% month-on-month increase, down from the previous 5.0%; the annualized rate was revised to 1.433 million units, from the previous 1.443 million units.
Key market news:
On Friday, three ministries issued a document to improve the commercial housing sales system, requiring standardized pre-sale conditions, strengthened supervision of pre-sale funds, and an orderly promotion of existing home sales to mitigate delivery risks.
On Friday, the Ministry of Foreign Affairs responded that China has consistently opposed illegal unilateral sanctions, expressing opposition to potential US sanctions on Chinese banks conducting business with Iran.
On Friday, the Ministry of Finance, together with the State Taxation Administration, drafted the 'Local Surtax Law (Draft for Comment)' and opened it for public consultation, aiming to establish a legal framework for local surtaxes.
On Friday, reports indicated that the Trump administration is considering expanding the scope of semiconductor tariffs, potentially extending from chips to end products such as laptops, gaming consoles, and data center servers.
On Friday, S&P maintained China's sovereign credit rating at A+ with a stable outlook, prompting a response from the Ministry of Finance.
On Friday, the National Development and Reform Commission (NDRC) announced that the 'Implementation Plan for Logistics Network Construction' has been officially issued, deploying key tasks such as interconnectivity among logistics hubs.
On Friday, the NDRC stated it would accelerate the disbursement of funds for new policy-based financial instruments and improve the diversified investment and financing model of the 'Six Networks' to promote the commencement of major projects.
On Friday, a US federal judge ruled that the Department of Defense's inclusion of AI company Anthropic on a blacklist was illegal and ordered that it must not be blacklisted.
On Friday, the Ministry of Industry and Information Technology and three other departments launched a one-year special rectification campaign on automobile product quality, focusing on inspections of enterprises and key components with higher risks regarding quality and consistency.
On Thursday, Federal Reserve official Schmid stated that current interest rates have not yet restrained the US economy and indicated he might have supported rate hikes at previous meetings.
On Thursday, Trump again sought to dismiss Federal Reserve Governor Cook. Through his lawyer, Cook denied any misconduct and stated that there were no legal grounds for his removal.
On Wednesday, Shanghai issued the "15th Five-Year Plan for the Development of Strategic Emerging Industries," proposing to advance key areas such as the three leading industries.
On Tuesday, the National Development and Reform Commission (NDRC) held a meeting to promote the "coordination of six networks," studying investment and financing mechanisms for these networks as well as supporting fiscal and financial policies.
Weekly market brief:
Market capital rotated frequently between AI-related stocks and all other sectors. Diverging views on the Fed's policy stance, combined with unabated tensions between the US and Iran, kept oil prices at high levels, raising the possibility of interest rate hikes within the year.
Domestically, internal demand remains relatively weak, and the market is skeptical about the sustainability of its recovery. Hong Kong stocks have recently tended toward range-bound fluctuations, with expectations that consolidation and volatility will persist. Against the backdrop of macroeconomic uncertainty and narrow market breadth, we recommend maintaining a defensive investment strategy, focusing on holding industry leaders with strong cash flows and high dividend yields, while actively capturing structural opportunities driven by policy support.
Looking ahead to next week, China will release August's official and non-official PMI data. The US will publish data on construction spending, auto sales, factory orders, durable goods orders, average hourly earnings, unemployment rate, and labor force participation rate. Additionally, the global central bank symposium is ongoing, with investors closely tracking governors' views on future interest rate trends. We continue to assess navigation conditions in the Strait of Hormuz and the Bab el-Mandeb Strait following the escalation of US-Iran conflicts. Furthermore, we are monitoring changes in Sino-US relations and the potential impact of relevant policies from both countries on the global supply chain and the technology sector of Hong Kong stocks. (Source: Bloomberg, Ping An Asset Management (Hong Kong) Co., Ltd.)
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$NVIDIA (NVDA.US)$ $Apple (AAPL.US)$ $Amazon (AMZN.US)$ $Micron Technology (MU.US)$ $Broadcom (AVGO.US)$ $Arista Networks (ANET.US)$ $KLA Corp (KLAC.US)$ $Lam Research (LRCX.US)$ $Applied Materials (AMAT.US)$ $Advanced Micro Devices (AMD.US)$ $Intel (INTC.US)$ $Ping An East-West Select ETF (03477.HK)$ $Ping An Technology Select ETF (03406.HK)$ $Ping An of China CSI HK Dividend ETF (03070.HK)$ $Dow Jones Industrial Average (.DJI.US)$ $NASDAQ 100 Index (.NDX.US)$ $Hang Seng Index(Net Total Return Index) (800173.HK)$ $Hang Seng TECH Index (800700.HK)$ $CSI 300 Index (800122.HK)$ $NASDAQ (NASDAQ.US)$ $NASDAQ 100 Index (.NDX.US)$ $Hang Seng TECH Index (800700.HK)$
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