Market Weekly Report | July 6–12, 2026

The Fed’s inflation-fighting-first stance has strengthened (Waller turned hawkish; June FOMC minutes revealed a split between rate hike and cut views). Geopolitical tensions around the Strait of Hormuz pushed oil prices up nearly 6% for the week. Hong Kong equities rebounded strongly as southbound capital flows surged back by HK$39 billion—Hang Seng Index rose +3.53% and Hang Seng Tech Index gained +4.95%. Internet giants led valuation recovery, with the sector surging 17% for the week. On the mainland, the STAR 50 Index stood out with a +4.52% gain, while the ChiNext Index extended losses at -4.41%.

1. Overview of the Global Macroeconomy

The core theme in global markets this week was"Hawkish Fed + China’s PPI hits new high + escalating geopolitical risks"—Fed Governor Waller’s hawkish remarks and the June FOMC minutes highlighted deepening internal divisions. This coincided with China’s PPI reaching its highest level since 2022, confirming imported inflationary pressures, while heightened tensions in the Strait of Hormuz drove a sharp intra-week spike in oil prices before they pulled back.

On the U.S. front,, On July 6, Fed Governor Waller delivered a clearly hawkish public speech, emphasizing that FOMC officials’ commitment to the 2% inflation target remains credible. He explicitly stated that rate cuts would only be considered if inflation shows sustained declines, and that economic weakness alone would not trigger premature easing. The policy focus has shifted back from guarding against labor market deterioration to preventing inflation from resurging. Waller also stressed that forward guidance should remain flexible and avoid overly specific commitments on future rate paths—a view consistent with Chair Wosch’s earlier remarks at the Davos Forum. The June FOMC meeting minutes, released on July 9 (the first meeting under Chair Wosch, condensed to 14 pages), revealed significant disagreement among officials over the future path of interest rates, with committee members simultaneously modeling two starkly divergent policy scenarios—rate hikes versus rate cuts—as U.S. year-over-year inflation has already risen to4.1%, marking the sixth consecutive year exceeding the 2% target, with Atlanta Fed data showing market pricing implies approximately75%. Wursh is pushing for Federal Reserve reforms, including establishing five working groups focused on communication, balance sheet policy, data sources, and other issues, and has hinted at reviewing the dot plot framework, making future Fed monetary policy even less predictable.

In China,, on July 9, the National Bureau of Statistics released June’s year-on-year CPI at+1.0%, below both the prior reading of 1.2% and market expectations of 1.1%, with a month-on-month decline of -0.3%; core CPI eased to 1.0%, reflecting still-weak end-demand. However, PPI rose further year-on-year to+4.1%, reaching its highest level since 2022, primarily driven by AI-related demand boosting prices for tech equipment and semiconductors; however, PPI turned negative month-on-month at -0.3%, the first such drop since last July, suggesting a marginal slowdown in upstream price momentum. The widening "scissors gap" between CPI and PPI effectively reflects structural divergence: AI-driven strength is transmitting to upstream equipment prices but failing to pass through effectively to downstream consumer prices. On the policy front, the State Council issued the '15th Five-Year' carbon peaking action plan, continuing to advance the green transition.

In terms of geopolitics, tensions in the Strait of Hormuz escalated sharply this week. In early July, Iran briefly announced closure of the strait, causing a sudden drop in shipping traffic, as Israel-Iran conflict flared again (with Israeli forces preparing to resume military operations against Iran), driving Brent crude up sharply on July 8 by+5.2%to above $78 per barrel. On July 10, Trump stated he agreed to continue negotiations with Iran but declared the ceasefire had ended, prompting oil prices to retreat from their highs. Weekend updates (July 13) indicated U.S. forces launched their third strike against Iran within a week, while Iranian media reported that the Bahrain headquarters of a U.S. company was attacked, suggesting geopolitical risk premiums could remain volatile.

II. Performance of Global Asset Classes

Scope clarification: U.S. equities/Asia-Pacific indices/crude oil/U.S. Treasuries are calculated from July 2 close → July 10 close (U.S. markets were closed on July 3 for the observed Independence Day holiday); Hong Kong and A-shares from July 3 close → July 10 close; gold and the U.S. Dollar Index from July 2 close → July 10 close; China 10-year bond yields from July 6 → July 10.

On the equity side,, Hong Kong stocks led major global markets this week. The Nasdaq rose+1.74%for the week, supported by stabilization in AI-related semiconductors, while the Dow edged slightly lower, dragged down by traditional industrials and financials.-0.50%, the divergence between growth and value persisted. Asia-Pacific markets showed significant divergence: the Nikkei 225 fell for the week-1.70%, the KOSPI, after last week's flash crash, was hit again this week by a single-day drop of -5.35% on July 8, ending the week lower-2.25%, the Taiwan Weighted Index declined nearly 3% for the week amid uncertainty ahead of Taiwan Semiconductor's earnings report. A-share markets exhibited extreme structural divergence: the STAR 50 surged against the trend, driven by domestic semiconductor substitution and AI application catalysts+4.52%, while the ChiNext Index plunged-4.41%, with the new energy and healthcare sectors continuing to see outflows.

In commodities, escalating tensions in the Strait of Hormuz became the key driver for oil prices this week. Brent crude soared from $71.80 to $76.01, posting a weekly gain+5.87%, with a single-day surge on July 8 briefly exceeding 5%. Gold remained largely flat amid a tug-of-war between geopolitical safe-haven demand and rising U.S. Treasury yields, with COMEX gold edging down slightly-0.29%to $4,113.7 per ounce.

In bonds, Waller's hawkish remarks and the FOMC minutes pushed U.S. Treasury yields higher across the curve. The 2-year Treasury yield rose+7 bpsrising to 4.21%, the 10-year yield increased+7 bpsrising to 4.56%, the 30-year yield increased+8 bpsbreaking above 5.06%, the yield curve steepened in a bearish fashion—with long-end yields rising more sharply—reflecting market repricing of persistent inflation and heightened rate hike expectations.+2 bpsto 1.7398%, showing little change.

In terms of exchange rates,The US Dollar Index remained largely flat (100.621 → 100.755, +0.13%), but the renminbi appreciated modestly against the dollar, with the USD/CNY central parity rate declining from 6.8066 to 6.7989, reflecting reduced FX demand from southbound capital outflows and support from China's trade surplus.

III. Weekly Review of the Hong Kong Market

This week, Hong Kong equities stood out among global equity markets, driven by a strong rebound in southbound fund inflows and valuation recovery in the internet sector.

(Image generated by AI)

In terms of index performance, the Hang Seng Index rose from 23,350 to24,175.10, posting a weekly gain of+3.53%; the Hang Seng Tech Index climbed from 4,499 to4,721.66, for a weekly gain of+4.95%, marking its largest single-week gain in the past eight weeks; the Hang Seng China Enterprises Index advanced from 7,699.76 to8,039.19, with a weekly gain of+4.41%. In terms of style, technology growth significantly outperformed high-dividend value sectors. On the valuation front, the A/H premium index closed at124.50, narrowing compared to the previous week, reflecting a reduced discount of Hong Kong-listed stocks relative to A-shares; the Hang Seng Index’s PE/PB ratios remain in historically low ranges.

In terms of sector performanceThis week, the best-performing sectors were discretionary consumer retail, staples retail, and media, primarily driven by valuation recovery in internet platforms and marginally improving consumer data. The worst-hit sectors included electrical equipment and semiconductors—industries that had seen significant gains previously—reflecting profit-taking at elevated levels and lingering concerns over AI computing capacity. From a global perspective, Hong Kong’s discretionary consumer, communication services, and financial sectors led the market.

In terms of individual stock highlights, core constituents of the Hang Seng Tech Index and Stock Connect eligible stocks posted strong performance this week, with internet sector valuation recovery serving as the dominant theme.

On the funding front, southbound capital recorded a net inflow of+HK$39.054 billionthis week, marking a sharp reversal from the previous week’s net outflow of HK$1.88 billion and representing one of the largest single-week net inflows recently. Daily flow patterns show funds poured in predominantly early in the week: net inflow of+HK$20.528 billionon July 6, and only+497 million, rebounded to+14.194 billion、7/9 +9.830 billion, and turned into net outflows on July 10-5.995 billion, reflecting profit-taking sentiment on Friday.

According to broker research reports, southbound funds recorded net purchases of Hang Seng Tech of approximatelyHK$18.1 billion, close to the historical mean plus two standard deviations, with a 'buy software, sell hardware' pattern: major positions added in software services, pharmaceuticals and biotechnology, and discretionary consumer retail, while reducing holdings in hardware equipment, semiconductors, and utilities. Additionally, this week's Hong Kong IPO volume nearedHK$57.7 billion, with industrial capital recording net sales of approximatelyHK$30.6 billion, warranting attention to supply-side pressure.

IV. Outlook for the Market Ahead

Short-term (1–2 weeks)The current rebound in Hong Kong equities has been driven by liquidity relief led by southbound capital flows, rather than confirmation of a fundamental inflection point. If China’s Q2 GDP data (market forecasts range from 4.1% to 4.4% year-over-year) comes in below expectations next week, it could heighten expectations for additional policy support, offering further backing to Hong Kong stocks. However, the U.S. earnings season is entering a dense phase (with semiconductor giants like Taiwan Semiconductor and ASML Holding reporting soon), putting the AI compute narrative to the test of earnings validation—either confirmation or refutation. Should Taiwan Semiconductor’s guidance fall short of expectations, the impact could transmit through the global semiconductor supply chain to Hong Kong’s tech sector. Geopolitical risks around the Strait of Hormuz continue to simmer—the U.S. military’s third round of strikes on Iran over the weekend and the attack in Bahrain indicate that tensions remain unresolved, leaving room for upward oil price spikes. This would reinforce the transmission channel of 'sticky inflation → rising U.S. Treasury yields → valuation pressure on growth stocks.'

Medium-termAmid the Fed’s continued prioritization of fighting inflation, the probability of a rate hike this year has risen to around 75%, and the 30-year U.S. Treasury yield has already breached 5.06%, underscoring that the backdrop of tight global liquidity remains unchanged. Hong Kong equities retain relative advantages: valuations remain at historical lows (AH premium index at 124.50), southbound capital’s pricing power has strengthened (evidenced by HK$39 billion net inflows this week), and internet stocks offer ample room for valuation recovery following sustained adjustments. However, persistent supply-side pressures stem from industrial capital outflows (HK$30.6 billion this week) and IPO-related capital diversion (HK$57.7 billion).

Allocation strategy

1. Hong Kong Internet Valuation Recovery + Southbound Leadership: Internet leaders surged 17% this week, validating the strong rebound potential under 'extremely low valuations + catalysts.' Top-tier platforms still hold allocation value. Southbound capital shows a clear structural preference of 'buying software, selling hardware,' making internet platforms the primary beneficiaries. Watch for tangible earnings uplift from sustained high growth in AI large-model usage (China’s weekly token usage reached 27.58 trillion tokens).

2. AI Compute/Semiconductors – Period of Earnings Differentiation: Next week’s earnings reports from Taiwan Semiconductor and ASML Holding are critical validation points for the global semiconductor supply chain. The AI semiconductor index has soared from 100 to nearly 390, and with valuations now stretched, any earnings guidance shortfall could trigger sharp corrections. Focus on industry leaders with high earnings visibility and solid guidance, and avoid names previously subject to excessive speculative trading.

3. Second-order beneficiaries of oil prices (geopolitical disruptions)Tensions in the Strait of Hormuz continue to escalate, with Brent crude rising to $76. Further geopolitical deterioration could boost upstream energy stocks (Hong Kong-listed oil and petrochemical sector), but would simultaneously intensify global inflationary pressures and dampen downstream demand. Energy equities can be tactically allocated to hedge against geopolitical risks, though investors should remain cautious about sharp sell-offs triggered by ceasefire negotiations.

4. High-dividend defensive playsAmid rising long-end U.S. Treasury yields (30-year yield surpassing 5.06%) and heightened global monetary policy uncertainty, high-dividend Hong Kong sectors (utilities, telecoms, and banks) retain core portfolio allocation value, particularly offering income cushioning during periods of elevated market volatility.

Risk Warning

⚠️ Probability of Fed rate hikes this year increases under its anti-inflation stanceWaller’s hawkish remarks and FOMC minutes indicate that further rate hikes remain on the table; if upcoming CPI/PPI data exceed expectations, strengthening hike expectations could weigh on valuations of global risk assets.

⚠️ Rising long-end U.S. Treasury yieldsThe 30-year U.S. Treasury yield has breached 5.06%; sustained increases would exert downward pressure on Hong Kong equity valuations—particularly detrimental to long-duration growth stocks.

⚠️ Recurrent geopolitical tensions in HormuzThe U.S. military’s third round of strikes on Iran over the weekend and attacks on U.S. companies in Bahrain signal continued escalation, with sharp swings in oil prices likely triggering significant volatility in risk appetite.

⚠️ Earnings season risks debunking AI narrativesIf semiconductor giants such as Taiwan Semiconductor and ASML Holding report earnings below expectations, it could trigger a concentrated correction in the global AI computing narrative, with Hong Kong tech stocks bearing the brunt.

⚠️ Sustainability of southbound capital flows remains uncertainSouthbound funds turned net outflows of HK$5.995 billion on Friday this week; if inflows subsequently slow or reverse, the rebound momentum in Hong Kong equities will weaken significantly.

⚠️ Hong Kong IPOs and industrial capital divestments are creating supply-side diversionsThis week’s IPO volume reached HK$57.7 billion, while industrial capital divestments totaled HK$30.6 billion, sustaining supply-side pressure that could offset the positive impact from southbound fund inflows.

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

Data source: AlphaPai Database and publicly available market data

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