Interest rate cut expectations cool again; Hong Kong stocks balance defense and growth [Ping An Asset Management (Hong Kong) Market Weekly]

Last Friday, the Hang Seng Index closed at 25,776.53 points, down 0.78% for the week. The CSI 300 Index closed at 4,807.31 points, up 0.80% for the week; the CSI 500 Index closed at 8,349.51 points, up 1.23%, and the CSI 1000 Index closed at 8,381.95 points, up 0.94%.

US large-cap tech stocks performed well, with the Nasdaq Composite Index hitting a new high, closing at 27,710.36, continuing to rise by 1.49%. The S&P 500 Index closed at 7,230.12, up 0.91% for the week, marking the fifth consecutive weekly gain for both indices. The Hang Seng Tech Index closed at 4,871.32 points, down slightly by 0.63% for the week, while the Wind Technology Select HKD Net Return Index remained stable, closing at 4,042.59 points, up 0.39% for the week.

Looking at the performance of reference indices for the high dividend theme market, the CSI Hong Kong Dividend Index closed at 4,184.96 points, up 0.26% for the week, and the Solactive Global Pacific Equity Select HKD Net Return Index closed at 2,079.76 points, down slightly by 0.16% for the week.

The money market fund performance remained stable, with the latest Secured Overnight Financing Rate (SOFR) in the United States quoted at 3.66%.

Key market events:

Last week, the global market focus was on the Federal Reserve's 'hawkish pause' during the April interest rate meeting and the structural rebalancing of the market following the conclusion of China’s first-quarter earnings season. At this meeting, the Fed voted 11-1 to keep interest rates unchanged. In Powell's final press conference of his term, he emphasized that inflation control has become more challenging due to energy price volatility triggered by the Middle East situation and the impact of tariffs. The Fed will adopt a 'wait-and-see' strategy, further cooling expectations for interest rate cuts within the year.

After experiencing earlier volatility, Hong Kong stocks demonstrated clear characteristics of both defensive and growth features last week. Insurance and high-dividend sectors performed strongly supported by solid earnings, while the technology growth sector showed high volatility resilience during the earnings verification period. Capital is accelerating its concentration into quality leaders with core competitive advantages.

On the A-share market, as the April earnings season officially concluded, market risk appetite improved before the May Day holiday. Trading volume remained consistently above 2 trillion yuan, with efficient switching between dividend defense and hardcore technology sectors. Particularly strong bottom-fishing intentions were observed in the lithium battery supply chain and high-end manufacturing sectors. Overall, the current Hong Kong stock market is at the intersection of 'policy expectation digestion' and 'earnings logic reshaping.' Despite lingering uncertainties in the external interest rate environment, the endogenous momentum of domestic economic recovery and structural improvement in corporate earnings provide a solid foundation for Hong Kong stock valuation recovery. Institutional funds are utilizing short-term volatility to achieve balanced allocation. For the entire week, the Hang Seng Index fell by 0.78%.

Key economic data:

Thursday, China's April RatingDog Manufacturing PMI stood at 52.2.

Thursday, the Manufacturing Purchasing Managers' Index (PMI) for April was 50.3%, down 0.1 percentage points from the previous month.

Wednesday, the U.S. March goods trade deficit was $87.9 billion; the forecast was a deficit of $88 billion.

Wednesday, the annualized number of new housing starts in the U.S. for March was 1.502 million units, higher than the expected 1.4 million units, with the previous value at 1.487 million units.

Wednesday, the preliminary month-on-month figure for U.S. March durable goods orders was 0.8%, compared to an estimated 0.5%, with the previous value at -1.3%.

Monday, data from the National Bureau of Statistics showed that industrial enterprises above designated size realized operating revenue of 33.19 trillion yuan from January to March, representing a year-on-year increase of 5.0%.

From January to March, the total profit of large-scale industrial enterprises nationwide reached 1.69604 trillion yuan, a year-on-year increase of 15.5%.

Last Friday, the final reading of the University of Michigan's consumer sentiment index for April in the US was recorded at 49.8, higher than the forecast of 48.5 and the initial value of 47.6.

Last Friday, the final reading of the one-year inflation expectation rate for April in the US was recorded at 4.7%, compared to an estimate of 4.8% and a previous value of 4.8%.

Key market news:

Thursday marked the legal deadline for US military action against Iran on May 1st; continued military action by the President may require Congressional authorization.

On Thursday, China tightened supervision over some companies attempting to transfer core technologies and assets overseas through methods such as re-registration, explicitly halting 'cosmetic outbound activities'.

On Thursday, the central authorities stressed intensifying efforts to strengthen fundamental research and enhance original innovation capabilities to solidify the foundation for building a strong technology-driven nation.

Thursday saw mandatory national standards requiring real-name registration and activation management for civilian drones, which are not permitted to fly until activated.

The Standing Committee of the National People's Congress passed the Social Assistance Law on Thursday, which will come into effect on July 1, 2026.

The Fed's April policy meeting on Thursday revealed significant divisions and decided to keep interest rates unchanged; some members advocated for a rate cut and disagreed with the statement’s wording.

On Wednesday, the nomination of Warsh for Federal Reserve Chairman received sufficient votes at the committee level to advance the confirmation process.

On Tuesday, the cyberspace administration department took actions such as summoning for talks, ordering corrections, and issuing warnings against platforms like CapCut for failing to implement labeling requirements for AI-generated content.

On Tuesday, a central meeting outlined measures to prevent and resolve risks in key areas, proposing to stabilize the real estate market, address local government debt, advance reforms in small and medium-sized financial institutions, and boost confidence in the capital markets.

On Tuesday, a central meeting proposed the full implementation of the 'AI+' initiative and improvements to AI governance, while emphasizing the need to tackle 'internally competitive' practices and promote the construction of a unified national market.

On Tuesday, Google reached an agreement with the U.S. Department of Defense, allowing the military to use Google's AI models in classified projects.

On Monday, the National Development and Reform Commission’s foreign investment security review mechanism prohibited foreign acquisition of the Manus project and ordered the transaction to be revoked.

Weekly Market Brief:

The current global macroeconomic environment is in a sensitive balance characterized by 'geopolitical disruptions and high energy price volatility.' Repeated fluctuations in the Middle East situation continue to drive up energy costs, not only exacerbating the difficulty of repairing global supply chains but also forcing major central banks to maintain an extremely cautious monetary policy stance between 'fighting inflation' and 'stabilizing growth.' Risk aversion remains strong in global financial markets.

Domestically, GDP grew by 5.0% year-on-year in the first quarter, showing resilience in a moderate recovery. New productive forces, led by high-end manufacturing and the digital economy, have become the new engine of growth. However, macroeconomic data from late April indicates that the domestic economy still faces structural challenges of strong supply and weak demand. The deep adjustment of the real estate market and lagging recovery of microeconomic expectations remain key difficulties for policy to address. Recent policy emphasis has been on maintaining proactive counter-cyclical adjustments, ensuring that government investment funds are quickly translated into physical workloads to provide a policy floor for stable economic performance throughout the year.

The pricing logic of the Hong Kong stock market is shifting from pure liquidity speculation to 'hard-tech barriers + earnings certainty.' The sustained net inflow of southbound funds fully reflects mainland capital’s recognition of the long-term allocation value of core assets in Hong Kong stocks.

Looking ahead to the coming week, China will release its unofficial PMI index for April. The U.S. will announce data including factory orders, durable goods orders, auto sales, building permits, average hourly earnings, unemployment rate, and labor force participation rate. As expectations for high-level interactions in mid-May approach, competition and cooperation in the technology sector will become the focus of market attention. We will continue to assess changes in U.S.-China relations and the potential impact of relevant policies from both countries on global supply chains and the Hong Kong stock technology sector.

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