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Hong Kong Stocks Lead as Major Global Markets Underperform [Ping An Asset Management (Hong Kong) Weekly Market Review]

Amid continued hardline stances from both the US and Iran, crude oil prices and US Treasury yields surged last week, with long-term sovereign bond yields in several countries hitting multi-decade highs, while major equity markets mostly declined. However, the Hong Kong stock market showed strong performance, leading major global markets. The Hang Seng Index closed at 26,009.46 points on Friday, up 3.55% from the previous week.

Compared to other major global markets, the A-share market also demonstrated resilience. The CSI 300 Index closed at 4,618.90 points on Friday, down 1.01% for the week; the CSI 500 Index closed at 7,854.33 points, down 1.70% for the week; and the CSI 1000 Index closed at 7,601.80 points, down 2.16%.

The Nasdaq Composite closed at 29,308.86 last Friday, down 2.45% for the week. The S&P 500 Index closed at 7,674.37 on Friday, down 1.43% from the previous week. The Hang Seng TECH Index closed at 4,766.16 points last Friday, up 1.24% for the week, while the Wind Technology Select HKD Net Return Index closed at 4,054.30 points, down 2.17% for the week.

Dividend assets performed strongly amid market volatility. The CSI Hong Kong Dividend Index closed at 4,066.45 points, surging 5.14% for the week, while the Solactive Global Pacific Equity Select HKD Net Return Index closed at 2,114.26 points on Friday, up 0.93% for the week.

The money market remained stable, with the latest Secured Overnight Financing Rate (SOFR) quoted at 3.63%.

Key market events:

The bond market drew intense scrutiny this week as long-term sovereign yields in multiple countries hit multi-year highs, squeezed by inflation, deficits, and AI financing demands. Led by China and Japan, foreign investors continued to reduce their holdings of US Treasuries. US Treasury Secretary Bessent unexpectedly announced an expansion of long-term bond buybacks, but the market remained unconvinced; yields briefly retreated before climbing back to elevated levels. FOMC minutes indicated that several officials leaned toward hiking rates, while the expanded buyback program added complexity to future rate decisions.

There are still no signs of easing in the Middle East stalemate. Trump refused to extend the ceasefire agreement, claiming he would launch an unprecedented economic war, with specific plans to be revealed next week. The UAE also announced a severance of economic and trade ties with Iran, potentially cutting off a key economic lifeline for Tehran. Additionally, Trump ordered a significant reduction in US-South Korea joint military exercises, stating that North Korea poses no threat during his term and that South Korea has been unhelpful in the context of the Iran conflict. Iran has intensified its control over the Strait of Hormuz, keeping shipping risks elevated. Oil prices have risen for consecutive days, and European natural gas prices climbed to a five-month high.

China's July industrial, consumption, and investment data missed expectations, while the decline in new home prices widened. Stricter taxation also impacted the luxury goods market. However, overseas funds have turned bullish on growth prospects for the first time in months. The Loan Prime Rate (LPR) remained unchanged, and housing provident fund regulations were amended to stimulate housing consumption. The Ministry of Finance announced it would introduce new policies for fiscal-financial coordination in the second half of the year to increase support for businesses and consumers.

As US-Mexico negotiations continue, Mexico is reportedly considering tightening trade measures against China. Germany's finance minister advocates for a tougher stance on China, although Switzerland has reached a new free trade agreement with China, granting tariff-free treatment to the majority of goods. Trump announced a three-day suspension of the 50% tariff on Canada, stating that Washington has reached a preliminary agreement with Ottawa; reports suggest tariffs on Canadian metals and automobiles will be reduced. For the week, the Hang Seng Index rose 3.55%. In terms of sectors, financials, consumer discretionary, and healthcare contributed the most to the index. Southbound capital recorded a net outflow of HKD 11.6 billion this week.

Key economic data:

On Friday, data showed that from January to July, national general public budget revenue totaled CNY 14.3696 trillion, a year-on-year increase of 5.8%. Of this, national tax revenue amounted to CNY 11.8381 trillion, up 6.7% year-on-year, while non-tax revenue was CNY 2.5315 trillion, up 1.6% year-on-year.

On Thursday, the US Philadelphia Fed Manufacturing Index for August came in at 47.4.

On Tuesday, US pending home sales in July fell 2.3% month-on-month, missing the forecast of 0.0%.

On Tuesday, US housing starts in July totaled an annualized 1.239 million units, missing the estimate of 1.344 million and down from the previous value of 1.427 million.

On Tuesday, U.S. import prices fell 0.4% month-on-month in July, missing the forecast of a 0.1% rise and reversing the previous 0.3% gain.

On Tuesday, China's exports of rare earths and related products totaled 10,314 metric tons in July, down 16.9% year-on-year. Cumulative exports for the year reached 76,861 metric tons, up 7% year-on-year.

On Tuesday, data showed that industrial value-added for enterprises above designated size grew 4.5% year-on-year in July, with new growth drivers making an increasingly strong contribution. Notable gains were seen in equipment manufacturing, high-tech manufacturing, and digital product manufacturing.

On Monday, the U.S. NAHB Housing Market Index rose to 35 in August, beating the forecast of 33.

On Monday, the New York Fed Empire State Manufacturing Index came in at 20.6 in August, surpassing the expectation of 11 and the prior reading of 15.6.

On Monday, Zhang Gang from the Investment Department of the National Bureau of Statistics stated that investment in high-tech manufacturing grew 3.3% year-on-year from January to July, accelerating by 0.1 percentage points compared to the first half of the year.

On Monday, the National Bureau of Statistics reported that retail sales of goods rose 1.1% year-on-year from January to July, holding steady with the growth rate seen in the first half of the year.

On Monday, the National Bureau of Statistics released data showing that value-added in digital product manufacturing for enterprises above designated size grew 17.3% year-on-year in July, accelerating by 3.5 percentage points from the previous month.

On Monday, according to the National Bureau of Statistics, national fixed-asset investment (excluding rural households) totaled RMB 26,032.8 billion from January to July, down 6.7% year-on-year on a comparable basis.

On Monday, the National Bureau of Statistics released data showing that value-added in high-tech manufacturing for enterprises above designated size grew 16.9% year-on-year in July, accelerating by 2.8 percentage points from the previous month.

On Monday, the National Bureau of Statistics released data showing that in July, the added value of industrial enterprises above designated size increased by 4.5% year-on-year, and rose by 0.11% month-on-month after adjusting for seasonal factors.

Key market news:

On Friday, the Ministry of Finance stated that a significant volume of local government special bonds and ultra-long-term special sovereign bonds remain to be issued and utilized in the second half of the year to sustain the intensity of fiscal policy.

On Friday, the Ministry of Finance issued a document to strengthen fiscal-financial coordination in boosting domestic demand, incorporating new working capital loans for eligible small, micro, and private enterprises into interest subsidy support with subsidies granted for a specified period.

On Friday, the process for local government financing vehicles (LGFVs) to exit the financing platform list entered a final sprint phase. Coupled with the exchanges setting constraint lines on bond issuance financing for urban investment companies, the financing environment for such entities has tightened further.

On Thursday, Trump announced stricter economic actions against Iran to promote its economic isolation, while the UAE simultaneously announced a suspension of trade and financial dealings with Iran.

On Thursday, Shanghai released the '15th Five-Year Plan' for urban renewal and housing development, proposing to improve the investment and financing system for urban renewal through multiple channels, including fiscal funds, ultra-long-term special sovereign bonds, and special bonds, while strengthening supporting housing finance measures.

On Thursday, the Ministry of Commerce responded that the US imposition of additional tariffs on drones and components under Section 232 measures constitutes discriminatory practice, urging the US to revoke the relevant tariff measures.

On Thursday, six departments in Shanghai jointly issued a notice on optimizing real estate policies and proposed phased home purchase subsidy arrangements to support residents' needs for replacement and improvement.

On Thursday, the first-instance verdict was delivered in the case involving Evergrande Group, Evergrande Real Estate, and Xu Jiayin, imposing heavy fines on the relevant entities and confiscating illegal gains, thereby strengthening risk disposal and legal constraints in the real estate and financial sectors.

On Thursday, the China Gold Association opposed the US inclusion of certain gold enterprises in the Entity List under the UFLPA, which led to the LBMA suspending their delivery eligibility, stating that this would disrupt the stability of the global gold industry chain.

On Thursday, the National Development and Reform Commission (NDRC) deployed measures to accelerate the disbursement of new policy-based financial instruments, emphasizing their use to supplement project capital and increase support for private investment projects.

On Wednesday, the U.S. Treasury announced it would at least double the size of its long-term nominal Treasury buyback operations and set effective and duration periods to enhance liquidity support in the long-term Treasury market.

On Tuesday, the State Council published its decision to amend the "Regulations on the Management of Housing Provident Funds" and clarified the implementation date, involving key institutional adjustments to the housing provident fund framework.

Last Saturday, the "Ecological Environment Code of the People's Republic of China" officially came into effect, marking a new institutionalized stage in China's ecological environment governance centered on the code.

Weekly market brief:

The July data for total retail sales of consumer goods, industrial production, real estate investment, and the unemployment rate all fell short of market expectations. Demand remains soft, with only the previously released import and export figures maintaining strong growth. We expect the overall macroeconomic landscape to continue featuring strong external demand but weak internal demand. Recent important meetings seemed to offer little incremental policy stimulus for economic growth in the second half of the year, and corporate outlooks are generally conservative. Real estate sales have not shown significant improvement, and developers continue to face cash flow pressures.

Chinese enterprises have made significant breakthroughs in artificial intelligence and technology, with the hard tech and large model sectors performing well this year. However, the real economy has not shown obvious signs of recovery. It takes time for national policies to be formulated, implemented, and take effect; we believe the macroeconomy will face considerable pressure in the short term. The state has listed digesting real estate inventory as a key direction, lifting purchase restrictions and lowering interest rates on existing mortgage loans to boost consumption. We believe these policies will have a positive impact on the economy. The macro environment still faces many challenges, with companies under operational pressure and an uneven path to recovery, necessitating the maintenance of a relatively accommodative monetary policy. The government is strengthening efforts to boost the economy by launching various stabilization measures, including issuing special sovereign bonds, moderately increasing the deficit, and promoting consumption in the automotive, real estate, infrastructure, and consumer electronics sectors.

The state has taken certain loan credit and credit enhancement measures for individual real estate firms, which has had a somewhat positive effect on stabilizing corporate cash flows and fundamentals. However, this has not ruled out the possibility of defaults by some lower-quality private real estate firms, or even those with state-owned enterprise backgrounds. Overseas, recent U.S. data shows persistently high inflation levels, complicating the Federal Reserve's interest rate decisions. U.S. restrictions on semiconductor equipment supplies to China indicate that the competitive dynamics between the two countries remain intense.

Looking ahead to the next week, China will release data such as July profits for industrial enterprises above designated size. The U.S. will publish data on house price indices, consumer confidence, personal income and spending, PCE inflation, durable goods orders, and retail and wholesale inventories. Additionally, the global central bank symposium is approaching, and investors will closely monitor views from central bank governors on future interest rate trends. We also continue to assess navigation conditions in the Strait of Hormuz and the Bab el-Mandeb Strait following the escalation of conflicts involving the U.S. and Iran. Furthermore, we are monitoring changes in Sino-U.S. relations and the potential impact of related policies from both countries on global supply chains and the Hong Kong-listed technology sector. (Source: Bloomberg, Ping An Asset Management (Hong Kong) Co., Ltd.)

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