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Investor confidence rises as US equities surge across the board; Hang Seng Index dips slightly [Ping An Asset Management (Hong Kong) Weekly Market Recap]

Last week, market sentiment was lifted by news that a provisional agreement on opening the Strait of Hormuz might be reached. Additionally, stronger-than-expected earnings guidance from some major tech companies and weaker-than-anticipated US nonfarm payroll data for July further propelled all three major US equity indices sharply higher. In contrast, Hong Kong stocks declined as mainland China expanded the scope of individual income tax to include overseas insurance proceeds, triggering a broad sell-off in insurance shares that weighed on the broader market.

The Hang Seng Index closed Friday at 25,668.03, down 0.84% from the previous week. In comparison, supported by strong export data, mainland A-shares rallied robustly: the CSI 300 Index closed Friday at 4,694.44, up 2.32% for the week; the CSI 500 Index closed at 7,980.12, surging 6.49% for the week; and the CSI 1000 Index ended at 7,679.53, jumping 8.45% over the week.

The Nasdaq closed at 29,722.30, soaring 5.12% for the week. The S&P 500 Index closed Friday at 7,757.64, up 3.58% from the prior week. The Hang Seng Tech Index closed last Friday at 4,858.29, gaining 0.60% for the week, while the Wind Technology Select HKD Net Return Index closed at 4,136.12, rising 3.50% over the week.

In terms of dividend indices, the CSI Hong Kong Dividend Index closed at 3,867.69, down 3.53%, while the Solactive Global Pacific Equity Select HKD Net Return Index closed Friday at 2,111.04, up 1.20% for the week.

The money market fund sector remains stable, with the latest quoted rate for the U.S. Secured Overnight Financing Rate (SOFR) at 3.65%.

Key market events:

The U.S. is reportedly planning to ban imports of Chinese data center components, including new optical modules. Analysts suggest this move may primarily serve as a bargaining chip ahead of high-level Sino-U.S. talks in September. Trump signed an executive order imposing a 15% tariff on imported polysilicon and its derivatives, along with setting a minimum price floor. China’s Ministry of Commerce announced it will implement strict case-by-case reviews on exports to the U.S. of dual-use items related to drones and has added six U.S. entities to its countermeasure list.

China’s July exports and imports both posted double-digit year-on-year growth, with export growth exceeding expectations and driven by the technology sector; however, private surveys indicated a weakening pace of expansion in both manufacturing and services that month. China’s July CPI and PPI data will be released on Sunday, with both expected to show a slight decline in year-on-year increases.

July data from the Institute for Supply Management showed U.S. manufacturing expanded for the seventh consecutive month, with the pace of expansion reaching its fastest level in over four years. Initial jobless claims remained below 200,000 for the third straight week, underscoring continued resilience in the labor market.

China is reportedly broadening the scope of individual income tax collection to include gains from overseas insurance policies. Some enforcement cases indicate tax authorities have begun levying a 20% tax on dividends and interest earnings from Hong Kong-based insurance products. The People’s Bank of China is also said to have increased its gold holdings in Hong Kong to support the development of a gold trading hub.

Japan’s cabinet approved a reduction in the consumption tax on food items, though the funding source remains unclear. Japan’s finance minister stated that Bessent expressed optimism about Japan’s fiscal outlook and denied that the U.S. was pressuring Japan via foreign exchange market intervention.

Prospects for reopening the Strait of Hormuz remain uncertain. Iran stated it has reached an agreement with Oman to establish a temporary shipping corridor lasting two to four months, but Iranian media reported the proposed arrangement would bar vessels from the U.S. and Israel. Ships from countries deemed hostile would need to pay compensation to use this critical waterway. Meanwhile, Houthi forces launched attacks on Yemeni government troops and Saudi Arabia’s Najran region, raising the risk of further escalation in Middle East conflicts.

For the full week, the Hang Seng Index declined by 0.84%. By sector, healthcare contributed the most positively to the index, while financials dragged it down the most. Southbound net inflows totaled HK$9.96 billion this week.

Key economic data:

On Friday, central bank data showed China’s foreign exchange reserves stood at USD 3.418776 trillion at the end of July, up from USD 3.41626 trillion in the prior month.

On Friday, the central bank released data showing China’s gold reserves reached 76.08 million troy ounces at the end of July, up from 75.44 million troy ounces at the end of June. The People’s Bank of China has now increased its gold holdings for the 21st consecutive month.

On Friday, according to the General Administration of Customs, China exported 49.268 million mobile phones in July, compared with 53.261 million in June.

On Friday, China's dollar-denominated imports rose 27.5% year-on-year in July, while exports increased 23.9% year-on-year.

On Friday, China's total value of goods trade imports and exports reached RMB 30.13 trillion in the first seven months of this year, up 17.3% year-on-year. Exports totaled RMB 17.44 trillion, up 14%, while imports amounted to RMB 12.69 trillion, up 22%.

On Thursday, U.S. wholesale sales fell 3% month-over-month in June, versus an estimated increase of 2.2% and a prior reading of 3.4%.

On Thursday, U.S. productivity in Q2 rose 1.4% quarter-over-quarter in its initial estimate, above the forecast of 0.6%.

On Thursday, initial claims for U.S. jobless benefits came in at 199,000 last week, below the forecast of 205,000 and up from the previous week's revised figure of 197,000.

On Thursday, U.S. Challenger job cuts totaled 33,429 in July, down from 45,849 in the prior month.

On Wednesday, the Institute for Supply Management's non-manufacturing index rose to 54.1 in July, slightly below the forecast of 54.5.

On Wednesday, the final S&P Global Services PMI for July came in at 54.6, up from 53.6 in June; the final S&P Global Composite PMI for July was 54.5, also up from 53.6 in June.

On Wednesday, U.S. private-sector employment rose by 44,000 in July, below the expected gain of 65,000; June's figure was revised upward to a gain of 95,000.

On Tuesday, final data showed that U.S. durable goods orders for June rose 0.5% month-over-month, exceeding the forecast of a 0.3% increase and matching the preliminary estimate of a 0.3% gain.

On Tuesday, U.S. factory orders for June declined 0.3% month-over-month, versus an expected increase of 0.2% and a prior decline of 1.3%.

On Tuesday, the U.S. trade deficit in June stood at $73.3 billion, slightly wider than the expected $73.0 billion but narrower than May’s revised deficit of $77.6 billion.

On Monday, the U.S. ISM Manufacturing Index for July rose to 55.6, above the forecast of 53.9.

On Monday, S&P Global reported that its U.S. Manufacturing PMI for July came in at 53.9, based on data released on August 3.

Key market news:

On Friday, the People's Bank of China announced it had increased its gold reserves for the 21st consecutive month.

On Friday, the land use rights and ongoing construction of the 'Evergrande Hongqiao International' project will be auctioned publicly on an asset platform on August 31.

On Thursday, China's Cyberspace Administration launched a cybersecurity review of products sold in China by Palo Alto Networks.

On Thursday, stock exchanges shut down local area network (LAN) market data channels inside their server rooms and uniformly switched to wide area network (WAN) connections, diminishing institutional traders’ microsecond-level market data advantage.

On Thursday, the Hong Kong Monetary Authority stated it maintains an open yet cautious stance regarding the issuance of additional stablecoin licenses and their timing, and declined to comment on market rumors.

On Thursday, China's National Medical Products Administration released the mandatory national standard for cosmetics, 'General Safety Requirements for Cosmetics,' which will take effect in 2028.

On Wednesday, the U.S. Treasury Department stated it would keep the scale of Treasury auctions unchanged for at least the next few quarters.

On Wednesday, it was disclosed that U.S. Customs has refunded approximately USD 100 billion in tariffs and processed a large volume of refund requests related to duties previously levied under emergency powers laws.

On Wednesday, the National Financial Regulatory Administration, the People's Bank of China, the China Securities Regulatory Commission, and the Ministry of Finance jointly issued guidance requiring sound corporate governance at financial institutions and strictly prohibiting the transfer of benefits to shareholders.

On Tuesday, the People's Bank of China announced it would conduct CNY 500 billion worth of three-month outright reverse repos to maintain ample liquidity.

On Monday, the State Council released a revised version of the 'Regulations on the Protection of Integrated Circuit Layout-Designs,' which will come into force on October 15, 2026.

Weekly market brief:

Markets have recently shown sharp divergence, with frequent rotation between artificial intelligence and hard-tech-related stocks and other sectors. The Federal Reserve faces significant internal disagreement on policy direction, compounded by escalating U.S.-Iran tensions, leading to broad expectations that rates may need to be hiked in the second half of the year. The U.S. economy is grappling with a macroeconomic environment characterized by high inflation and low growth, placing the Fed in a policy dilemma.

Traditional sectors rebounded sharply after a steep correction in June, and sector rotation is expected to remain highly active going forward. Rising tensions in the Middle East have pushed up energy and supply chain costs, compelling major central banks to adopt an extremely cautious monetary policy stance as they balance inflation control against economic stability.

Domestically, the macroeconomy has demonstrated resilient, moderate recovery, with new-quality productive forces—led by advanced manufacturing and the digital economy—emerging as a new growth engine. However, recent high-frequency data indicate persistent structural imbalances between strong supply and weak demand. The deep adjustment in the property market and the lagging recovery in micro-level sentiment remain key challenges that policymakers must urgently address.

Recently, policymakers have emphasized maintaining robust countercyclical support and ensuring government investment translates quickly into tangible output, providing a policy floor for stable economic performance throughout the year. The Hong Kong stock market has continued to see southbound capital inflows this year, fully reflecting mainland investors’ recognition of the long-term allocation value of core Hong Kong-listed assets.

Looking ahead to the coming week, China will release July data on the producer price index (PPI), consumer price index (CPI), new yuan loans, total social financing, and foreign direct investment. The United States will release data on existing home sales, CPI, average hourly earnings, PPI, retail sales, and consumer sentiment. We continue to monitor shipping conditions through the Strait of Hormuz and the Bab el-Mandeb Strait following the escalation of U.S.-Iran tensions. Additionally, we are tracking developments in U.S.-China relations and the potential impact of related policies on global supply chains and the technology sector of Hong Kong-listed stocks. (Source: Bloomberg, Ping An Asset Management (Hong Kong) Company Limited)

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