Market Weekly Report | June 22–28, 2026

The US core PCE price index rose 3.4% year-over-year in May, hitting its highest level since October 2023, fueling expectations of further rate hikes. Meanwhile, US-Iran tensions flared up again on June 27, casting doubt on the memorandum of understanding signed just last week. Global tech stocks sold off sharply, with the Nasdaq falling 4.60% for the week, Hong Kong’s Hang Seng Index plunging 5.24%, and the Hang Seng Tech Index crashing 7.57%. Southbound capital flows defied the trend, recording a net inflow of HK$8.924 billion. Onshore Chinese equities saw an extreme divergence—technology names surged while value stocks slumped—as building materials rallied over 10% for the week but non-ferrous metals dropped more than 8%. Brent crude continued its decline, falling 8.06%, yet the 10-year US Treasury yield moved inversely lower by 8 basis points to 4.38%.

1. Overview of the Global Macroeconomy

The core theme in global markets this week was"Persistent inflation + recurring geopolitical risks + tech sector correction"—May’s US PCE data confirmed that inflationary pressures remain elevated, heightening expectations of further Fed rate hikes. Coupled with a sudden weekend escalation in US-Iran tensions, global risk appetite deteriorated rapidly, with tech stocks bearing the brunt of the sell-off.

On the US front,, May’s PCE data showed that headline PCE prices rose4.1%, above April’s 3.8%; more importantly,core PCE rose 3.4% year-over-year, reaching its highest level since October 2023, and increased 0.3% month-over-month, higher than April’s 0.2%. This data validates the Federal Reserve’s hawkish pivot in its June SEP (Summary of Economic Projections)—the 2026 PCE inflation forecast was sharply revised upward from 2.7% in March to 3.6%, and the core PCE forecast was raised from 2.7% to 3.3%. The dot plot indicated that among 19 FOMC participants,9 expected at least one rate hike this year, and 6 anticipated two hikes, the policy reaction function has shifted from "cut rates when the economy weakens" to "no rush to cut rates until inflation is confirmed to have receded, with rate hikes not ruled out if necessary." The federal funds futures market’s pricing for the July 30 FOMC meeting already reflectsa 57.9% probability of holding rates steady at 3.50%-3.75% and a 42.1% probability of hiking rates to 3.75%-4.00%. However, some institutions noted that the sharp drop in oil prices will likely push June’s month-over-month inflation into negative territory, suggesting May may have marked the peak of this inflation cycle.

On the geopolitical front,, on Saturday, June 27, U.S. forces launched strikes against southern coastal areas of Iran. Iran strongly condemned the action and threatened retaliation, accusing the U.S. of violating the memorandum of understanding signed just days earlier on June 19. The previous week, the signing of the U.S.-Iran peace agreement had triggered a more than 10% plunge in oil prices, rapidly erasing the geopolitical risk premium—yet this dynamic faced reversal risks this week. Although oil prices continued to decline during the week due to expectations of uninterrupted shipping through the Strait of Hormuz, the weekend escalation in hostilities has sharply increased uncertainty over next week’s oil price direction.

In China,, cumulative year-to-date profits of industrial enterprises above designated size rose further in January–May; the China Macroeconomic Forum estimates that GDP growth for the first half of the year falls within the4.5%-4.7%range. The economic fundamentals continue to show modest recovery, but its supportive effect on Hong Kong equities has been offset by external rate hike expectations and geopolitical risks.

II. Performance of Global Asset Classes

Scope clarification: As June 19 was the U.S. Juneteenth holiday (U.S. markets closed) and Hong Kong markets remained closed for the Dragon Boat Festival, weekly performance of major asset classes is calculated from the closing levels on June 18 (the last trading day before the holiday for U.S. stocks, A-shares, and Hong Kong stocks) or June 19 (for assets like gold and the U.S. dollar index that continued trading) through the close on June 26.

Key theme of the week: rising rate hike expectations intertwined with geopolitical risks led to a sharp pullback in global tech stocks, continued declines in crude oil, weaker gold, a modestly stronger dollar, and a surprising drop in U.S. Treasury yields.

On the equity side,, global technology stocks faced concentrated selling pressure. U.S. equities showed a clear divergence between strength in the Dow and weakness in the Nasdaq—The Dow Jones Industrial Average rose 0.60% for the week,supported by defensive blue-chip stocks, whilethe Nasdaq Composite plunged 4.60% for the week,with a single-day drop of 2.21% on June 23. The S&P 500 fell 1.96% for the week, posting its steepest daily decline of 1.44% on June 23. Asia-Pacific markets also came under pressure,as the Nikkei 225 declined 2.65% for the week,experiencing extreme intraweek volatility—surging 4.61% on June 25 before plunging 4.15% the next day, June 26.

A-share markets also exhibited stark structural divergence. The Shanghai Composite fell 1.55% for the week to close at 4,027.26 points, briefly approaching the psychological 4,000-point level on Friday; the CSI 300 dropped 1.48%, the ChiNext Price Index declined 1.37%, the Shenzhen Component fell 1.55%, and the Wind All-A Share Index slipped 1.40%.In contrast, the STAR Market Composite Index rose 1.99%, making it the only broad-based index to post gains.

In terms of sector dynamics,Building materials surged 10.87% for the week, followed by electronics up 5.39%, leading sector gains,non-bank financials gained 2.26% and basic chemicals added 0.99%, trailing closely behind; meanwhile, non-ferrous metals tumbled 8.44%, automobiles dropped 7.74%, beauty and personal care fell 7.08%, and steel declined 6.24%, leading the losses. Among sub-sectors, glass and fiberglass soared 23.22%, and semiconductors rose 10.12%, topping the gainers; precious metals slumped 14.51% and industrial metals dropped 11.41%, leading the decliners. Brokerage stocks strengthened notably this week, with the sector as a whole ranking among the top performers; several individual stocks posted weekly gains exceeding 20%, boosting the non-bank financial sector's performance.

In commodities, crude oil continued its sharp decline from last week, extending losses further.Brent crude fell approximately 8.06% for the week to $71.99 per barrel, while WTI dropped to $69.23 per barrel. Persistent expectations of uninterrupted shipping through the Strait of Hormuz and concerns over global demand exerted major downward pressure, but renewed U.S.-Iran tensions on June 27 introduced upside risks to oil prices next week.COMEX gold declined about 2.53% for the week to $4,096.3 per ounce, as a stronger U.S. dollar and fading safe-haven demand (prior to the weekend’s escalation in geopolitical tensions) jointly weighed on gold prices.

In bondsOne noteworthy 'counterintuitive' phenomenon is that despite the PCE data coming in above expectations and rising rate hike bets,the 10-year U.S. Treasury yield actually declined by 8 basis points from 4.46% to 4.38%.This reflects that the hawkish dot plot and tightening expectations had already been fully priced in by markets following the June FOMC meeting, while the sharp drop in oil prices—leading to downward revisions in inflation expectations—became the dominant market narrative this week. The 2-year Treasury yield fell by 12 basis points from 4.19% to 4.07%, with the steeper decline at the short end signaling heightened concerns over an economic slowdown. China’s 10-year government bond yield edged slightly lower to 1.73%.

In terms of exchange rates,, the U.S. dollar index strengthened modestly, rising from 100.618 to 101.127, up roughly 0.50% for the week, supported by both rate hike expectations and safe-haven demand.

III. Weekly Review of the Hong Kong Market

Hong Kong equities experienced a broad-based pullback this week, becoming one of the weakest-performing markets in Asia amid mounting pressures from rising external rate hike expectations, a global tech sector selloff, and recurring geopolitical risks.The Hang Seng Index plunged 5.24% to close at 22,671.90 points, the Hang Seng Tech Index tumbled 7.57% to settle at 4,255.59 points, and the Hang Seng China Enterprises Index fell 6.46% to 7,460.84 points。

On valuation,, as of June 26, the Hang Seng Index's P/E ratio stood at11.08x(at the 66th percentile since 2010), and its P/B ratio was1.10x(at the 36th percentile); the Hang Seng Index's equity risk premium4.65%wasat the 12th percentile—a historically very low level since 2010. Such extreme compression in the risk premium suggests that market pricing already fully reflects risk, implying theoretical medium- to long-term allocation value, though near-term performance remains constrained by external interest rate and geopolitical uncertainties.

In terms of sector performance, with materials, consumer discretionary, and energy sectors leading the decline, in sync with falling oil prices and a global pullback in commodity markets. The media and internet sector also dropped sharply, as Hong Kong-listed tech leaders faced concentrated selling pressure:

The aforementioned worst-hit stocks are all constituents of the Hang Seng Tech Index or eligible for Southbound trading under Stock Connect, reflecting the systematic spillover of global tech valuation de-rating pressures onto Hong Kong’s AI and internet sectors.

Capital conditionswas a key highlight of this week’s Hong Kong market. Despite the sharp index decline,Southbound capital recorded a net inflow of HK$8.924 billion this week, marking a significant improvement of HK$11.365 billion compared to the prior week’s net outflow of HK$4.441 billion. The daily flow pattern showed a V-shaped trend of “sell first, buy next, then sell again”:

On June 24, a single-day net inflow of HK$15.751 billion marked the weekly peak, indicating mainland investors accelerated their “bottom-fishing” during the sharp Hang Seng Index selloff. However, note that net outflows resumed on June 25–26 for two consecutive days, totaling HK$11.378 billion, signaling some weakening of sentiment in the latter part of the week. Year-to-date through June 26, cumulative Southbound net inflows amounted to approximatelyHK$305.486 billion, reinforcing mainland investors’ growing pricing power in the Hong Kong market. The Hong Kong Exchanges and Clearing (HKEX) reported an average daily market turnover of approximatelyHK$243.2 billion, up 6.36% from the prior week’s average of about HK$228.7 billion, clearly exhibiting a high-volume selloff and widening divergence between bullish and bearish positions.

IV. Outlook for the Market Ahead

Key calendar

Core Thesis

Short-term (1–2 weeks): Hong Kong equities are likely to remain range-bound near their lows, though a technical rebound following a sharp selloff remains possible. The Hang Seng Index plunged over 5% this week and the Hang Seng Tech Index dropped more than 7%, showing clear signs of being oversold in the short term; meanwhile, southbound capital recorded net inflows of HK$8.9 billion for the week, providing some support at current levels. However, next week faces three key uncertainties—June 27: Escalation of U.S.-Iran tensions and its geopolitical spillover(should transit through the Strait of Hormuz be disrupted again, a sharp spike in oil prices would impact global inflation expectations and risk appetite),July 2: U.S. nonfarm payrolls data prompting repricing of rate hike expectations(if nonfarm payrolls significantly beat expectations, the probability of a July rate hike—currently at 42.1%—would rise further, pushing U.S. Treasury yields higher and once again weighing on Hong Kong equity valuations), andJuly 1: Speeches by three central bank governors—including Kevin Warsh—at Sintra(Warsh’s hawkish or dovish stance will directly influence global interest rate pricing anchors).

Medium-term: The Hang Seng Index’s equity risk premium stands at 4.65%, already at the 12th percentile of its range since 2010—an extreme low—leaving limited room for further valuation compression. Once rate hike expectations are fully priced in and geopolitical risks stabilize temporarily, a valuation recovery in Hong Kong equities could offer significant upside. Southbound flows have totaled over HK$300 billion year-to-date, reflecting growing mainland investor influence over Hong Kong market pricing and providing structural support at current levels.

Allocation strategy

1. AI hardware/tech growth—pullbacks present buying opportunitiesThe global AI industry remains fundamentally strong. After the Hang Seng Tech Index plunged by 7.57% this week, valuations of some leading companies have returned to attractive levels. The share of trading volume in tech sectors across markets is at historical highs, indicating high capital concentration—this implies heightened volatility but also confirms that the underlying industry trend has not reversed. Consider left-side positioning opportunities in AI hardware segments such as computing infrastructure and semiconductor equipment following recent pullbacks.

2. Valuation recovery in the brokerage sectorMainland China’s brokerage stocks strengthened notably this week (Huaan Securities +35%, China Merchants Securities +10%), reflecting market expectations for capital market reforms and positive earnings pre-announcements for interim results. Hong Kong-listed Chinese brokerages trade at even lower valuations, offering potential AH-share pairing opportunities.

3. Defensive appeal of low-valuation, high-dividend Hong Kong stocksThe Hang Seng Index trades at 11.08x P/E and 1.10x P/B, with equity risk premium at an extreme low. High-dividend blue chips (energy, telecoms, utilities) provide a yield cushion amid heightened market volatility. Southbound capital continues flowing into these preferred assets.

4. Second-order impact of oil pricesBrent crude has fallen below USD 72. If US-Iran tensions do not escalate further and the Strait of Hormuz remains open, a lower oil price anchor would benefit oil-consuming sectors such as air transport and chemicals. However, if conflict escalation triggers an oil price rebound, watch for dual impacts on inflation expectations and Hong Kong energy stocks.

Risk Warning

⚠️ US-Iran conflict escalates beyond expectationsFollowing US airstrikes on southern Iran on June 27, Iran threatened retaliation. Should passage through the Strait of Hormuz be disrupted again, a sharp oil price surge would jolt global inflation expectations and risk sentiment, hitting Hong Kong energy and shipping sectors first and foremost.

⚠️ Stronger-than-expected US nonfarm payrolls boost odds of rate hikes: If the July 2 non-farm payroll data comes in strong, the probability of a Fed rate hike in July could rise further from 42.1%, and higher U.S. Treasury yields would constrain the valuation recovery room for Hong Kong equities.

⚠️ Crowded trades in global tech stocks reverse: Trading volumes in tech sectors across markets are all at historically high levels as a share of total market turnover. If the AI investment narrative shows signs of marginal weakening, the risk of concentrated selling in tech stocks will increase, potentially amplifying short-term volatility in the Hang Seng Tech Index.

⚠️ Southbound capital flows turn into sustained net outflows: Although southbound funds recorded a net inflow of RMB 8.9 billion for the full week, they turned into net outflows over the last two days (RMB 8.9 billion outflow on June 25 and RMB 2.5 billion outflow on June 26). If this net outflow trend continues next week, liquidity support for Hong Kong equities will weaken.

Disclaimer: This report is for internal discussion purposes only and does not constitute investment advice.

Data sources: AlphaPai database and publicly available market data

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