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Tech sector drags US equities lower across the board; Hang Seng Index turns from gains to losses [Ping An Asset Management (Hong Kong) Weekly Market Recap]

Last week, significant pullbacks in the tech sector sent all three major US indices lower, while the Hang Seng Index turned from gains to losses starting Wednesday. On Friday, the Hang Seng Index closed at 24,961.95, down 0.88% from the previous week. The CSI 300 Index closed Friday at 4,816.92, down 1.54% for the week; the CSI 500 Index closed at 8,251.14, down 1.30%; and the CSI 1,000 Index closed at 8,340.96, down 0.81%.

US equity indices declined sharply amid pressure from the tech sector. The Nasdaq closed Friday at 28,957.60, down 4.53% for the week. The S&P 500 ended a nine-week winning streak, closing Friday at 7,383.74, down 2.59% for the week. The Hang Seng Tech Index closed Friday at 4,888.39, edging up 0.09% for the week, while the Wind Tech Select HKD Net Return Index posted notable gains, closing the week at 4,289.76, up 2.14%.

Among high-dividend thematic benchmark indices, the CSI Hong Kong Dividend Index closed last week at 4,001.81, up 0.34% for the week. Meanwhile, the Solactive Global Pacific Equity Select HKD Net Return Index was dragged down by US market weakness, closing Friday at 2,041.74, down 2.40% for the week.

Money market funds remained stable, with the latest quoted rate for the Secured Overnight Financing Rate (SOFR) at 3.62%.

Key market events:

The U.S. economy remains resilient, with both manufacturing and services expanding robustly and businesses adding jobs significantly. However, inflation concerns persist: the Federal Reserve’s Beige Book noted that inflation continued to rise across many districts, and several policymakers signaled that rate hikes could occur this year. Friday’s nonfarm payroll data may further reinforce expectations for higher rates. Meanwhile, eurozone inflation in May rose above 3% for the first time since 2023, making a rate hike next week almost certain. The Bank of Japan is also reportedly considering raising rates in June.

U.S.-Iran negotiations remain deadlocked, with both sides engaging in their most severe confrontation in weeks. Iran has allowed the International Atomic Energy Agency (IAEA) to inspect the Bushehr nuclear power plant but refused to let inspectors verify the location and status of its enriched uranium stockpiles. Additionally, the U.S. imposed sanctions on Cuba’s head of state, with Trump stating that after Iran, Cuba would be 'dealt with' next.

On trade, the U.S. plans to impose new tariffs of at least 10% on imports from major trading partners including China and the European Union, though the Trump administration is simultaneously advancing the establishment of a U.S.-China Trade Council. Trump expressed confidence that the U.S. and India will reach a trade agreement by the end of this week’s negotiations. The OECD stated that China’s subsidy levels far exceed those of other economies and could distort markets.

Beijing has further strengthened oversight of outbound investment, proposing to improve the national security review system for overseas investments. For the first time at the level of administrative regulations, individuals have been explicitly included within the framework governing outbound investment. It is also reported that regulatory scrutiny over decision-making related to overseas mining investments will be intensified.

For the full week, the Hang Seng Index declined by 0.88%. By sector, communication services contributed the most positively to the index, while financials weighed on it the most. Southbound net inflows amounted to approximately HK$22.8 billion this week.

Key economic data:

On Friday, China reported that its total service imports and exports from January to April 2026 reached RMB 2.48532 trillion, an increase of 4.9% year-on-year.

On Thursday, final data showed U.S. labor costs rose 1.8% quarter-over-quarter in the first quarter, below the forecast of a 2.4% increase.

On Thursday, the number of Americans continuing to claim unemployment benefits for the week ended May 23 stood at 1.777 million, slightly below the forecast of 1.78 million.

On Thursday, initial jobless claims in the U.S. last week totaled 225,000, higher than the forecast of 213,000 and the previous week's revised figure of 215,000.

On Thursday, U.S. layoff announcements in May totaled 97,006, the highest for any May since 2020.

On Wednesday, U.S. factory orders rose 4.8% month-over-month in April, marking the largest increase since May 2025.

On Wednesday, U.S. durable goods orders for April rose by a final reading of 8.0% month-over-month, versus an estimated 7.9%.

On Wednesday, the Institute for Supply Management's (ISM) Non-Manufacturing Index for May rose to 54.5, above the forecast of 53.8.

On Wednesday, S&P Global's final U.S. Services PMI for May came in at 50.7, down from the prior reading of 50.9.

On Wednesday, U.S. ADP employment change for May showed an increase of 122,000 jobs, exceeding expectations of 117,000 and the prior reading of 109,000.

On Tuesday, U.S. job openings (JOLTS) for April stood at 7.618 million, up from the previous reading of 6.866 million.

On Monday, the Institute for Supply Management's (ISM) Manufacturing Index for May rose to 54.0, beating the estimate of 53.0.

On Monday, S&P Global's final U.S. Manufacturing PMI for May came in at 55.1, slightly below the prior reading of 55.3.

On Monday, the Chicago PMI for May surged to 62.7, far surpassing the expectation of 50.5 and the prior reading of 49.2.

On Monday, the preliminary U.S. goods trade deficit for April was $82.4 billion, narrower than the expected deficit of $87.0 billion.

Key market news:

On Friday, the General Office of the State Council required more detailed risk assessments for private equity funds, stepped-up on-site inspections for key private equity firms, and enhanced monitoring and oversight of trading activities by private securities funds.

On Friday, the General Office of the State Council issued guidelines on strengthening regulation, preventing risks, and promoting high-quality development of private equity investment funds, improving entry and classification-based supervision, and strictly prohibiting private equity funds from engaging in unauthorized lending or disguised debt investments disguised as equity ('equity in name, debt in substance').

On Friday, the Shenzhen Financial Regulatory Bureau and other departments jointly issued measures to promote high-quality development of new energy vehicle insurance in Shenzhen, unveiling the 'Ten Shenzhen Measures' to advance auto insurance reform and enhance service quality.

On Friday, the National Healthcare Security Administration and the Ministry of Finance issued the Interim Procedures for Cross-Provincial Mutual Assistance Use of Individual Accounts under the Basic Medical Insurance Scheme for Employees, clarifying that insured individuals’ close relatives may use these accounts across provincial borders.

On Thursday, the three major exchanges revised management requirements for securities firms’ trading business units and launched a targeted rectification initiative, emphasizing fair trading and strictly prohibiting the provision of special privileges to select investors.

On Thursday, the Ministry of Commerce stated its opposition to U.S. trade restrictions against China based on allegations of 'forced labor,' urging the U.S. side to halt unilateral restrictions.

On Wednesday, Trump signed an executive order strengthening AI model reviews, setting a 30-day pre-release government review period for certain AI models.

On Tuesday, the State Council issued the '15th Five-Year Plan for Accelerating Agricultural and Rural Modernization,' outlining key tasks and policy measures for agricultural and rural modernization during the 15th Five-Year Plan period.

On Monday, the Trump administration plans to appeal a federal judge’s order requiring refunds of invalid tariffs, which could delay the tariff refund process.

On Monday, the State Council released regulations on outbound investment, explicitly supporting investors in lawfully conducting independent outbound investments and advancing the establishment of multilateral and bilateral investment cooperation mechanisms.

On Monday, the 'Plan on Further Deepening State-Owned Enterprise Reform (2026–2029)' was issued, prompting local governments and centrally administered state-owned enterprises to begin disseminating, studying, and implementing arrangements for the next round of SOE reforms.

Weekly Market Brief:

The equity market is currently caught in a tug-of-war between geopolitical disruptions and the AI narrative. Rapid advancements in artificial intelligence have fueled investor expectations of a surge in productivity and demand, driving strong recent interest in related stocks. SpaceX's upcoming IPO has also drawn global attention.

Meanwhile, recurring volatility in the Middle East continues to push up energy costs, not only complicating the recovery of global supply chains but also compelling major central banks to maintain an extremely cautious monetary policy stance as they balance inflation control against economic stability.

Domestically, the macroeconomy has shown resilient, moderate recovery, with new-quality productive forces—led by advanced manufacturing and the digital economy—emerging as a new growth engine. However, data from the May Day holiday period indicate persistent structural imbalances characterized by robust supply but weak demand. The deep adjustment in the property market and the lagging recovery of microeconomic agents’ expectations remain key challenges requiring targeted policy intervention. Recent policy guidance stresses maintaining proactive countercyclical adjustments and ensuring government investment translates into tangible output as early as possible, thereby providing a policy floor for stable economic performance throughout the year.

Hong Kong’s equity market is shifting its valuation focus toward hard-tech competitive advantages and earnings certainty. Sustained participation by southbound capital clearly reflects mainland investors’ recognition of the long-term allocation value of core Hong Kong-listed assets. Looking ahead to the coming week, China will release May data on exports and imports, new yuan loans, total social financing, the producer price index (PPI), and the consumer price index (CPI). The U.S. will release data on consumer credit, existing home sales, wholesale inventories, CPI inflation, average hourly earnings, PPI, and consumer sentiment.

In addition, we will continue to assess whether the United States and Iran can reach an agreement to reopen the Strait of Hormuz. We are also monitoring developments in U.S.-China relations and the potential impact of related policies from both countries on global supply chains and the Hang Seng tech sector. (Source: Bloomberg, Ping An Asset Management (Hong Kong) Company Limited)

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