Hang Seng Index: China Stimulus Hopes Fade; Tech Stocks Extend Losses – Weekly Recap

US Markets: Nasdaq Snaps Four-Week Losing Streak

US equity markets posted gains in the week ending March 21, snapping a four-week losing streak. The Fed provided some relief from an extended sell-off, keeping interest rates at 4.5% on March 19, aligned with market expectations.

However, the FOMC Economic Projections signaled a dovish Fed stance, easing fears of a tariff-triggered pivot to a more hawkish outlook. Expectations of 60 basis points in rate cuts through the remainder of the year drove demand for risk assets.

The Nasdaq Composite Index and the S&P 500 gained 0.17% and 0.51%, respectively. The Dow rallied 1.20%, marking the second weekly gain in five weeks.

Despite the dovish Fed outlook, the gains were modest amid multiple headwinds:

• Middle East tensions: The US imposed fresh sanctions on Iran, and an Israeli airstrike on Gaza raised fears of a re-escalation in the conflict.
• Tariff policy uncertainty: On March 21, President Trump suggested potential flexibility on looming tariffs. However, lingering trade risks fueled economic uncertainty.
• US recession concerns: US economic indicators raised jitters about a recession, affecting risk sentiment.

China Economic Data Dampens Fresh Stimulus Hopes

On March 17, crucial economic data from China signaled a resilient economy amid heightened trade tensions. Key stats included:

• Retail sales increased 4% year-on-year (YoY) in January and February, up from 3.7% in December.
• Industrial production grew 5.9% YoY, down from 6.2% in December.
• However, the unemployment rate rose from 5.1% in January to 5.4% in February.

The upswing in retail sales likely reflected the impact of Beijing’s stimulus measures, targeting consumer spending and domestic demand. However, escalating US-China trade tensions weighed on industrial production and labor market conditions. A sustained rise in unemployment may also limit the effectiveness of consumption-focused stimulus.

Meanwhile, the People’s Bank of China (PBoC) kept the one-year and five-year Loan Prime Rates at 3.1% and 3.6%, respectively, on March 20. The policy status quo overshadowed the dovish Fed outlook, contributing to a market pullback.

Hong Kong and Mainland China equity markets extended losses on March 21 amid reports that the PBoC saw no immediate need for further rate cuts. Officials reportedly stated that economic momentum and existing policy had reduced the urgency for additional easing.

Hang Seng Index and Mainland China Markets Slide

The Hang Seng Index dropped 1.13% in the week ending March 21, following the previous week’s 1.12% loss. Significantly, the Index had climbed to its highest level since November 2021 before hitting the reverse.

US tariff uncertainty and Beijing’s silence on fresh stimulus measures contributed to the losses. Additionally, a Bank of America report warning of a potential market correction triggered Thursday and Friday’s sharp sell-off. Real estate and tech stocks dragged the Index into negative territory. Key movers included:

• The Hang Seng Mainland Properties Index slid by 3.56%.
• The Hang Seng Technologies Index tumbled 4.10%.
• Tech giants Alibaba (09988) and Tencent (00700) posted weekly losses of 3.76% and 2.42%, respectively, while Baidu (09888) slipped by 0.22%.

Mainland China’s equity markets also retreated, with the CSI 300 and Shanghai Composite Index falling 2.29% and 1.60%, respectively.

Brian Tycangco, editor and analyst at Stansberry Research, remarked on market speculation:

“Some are saying China’s bull market is in danger of ending because of risks that stimulus will disappoint. Well, I don’t think so. PBoC has plenty of room to stimulate if the need arises. And I’ve noticed that they are more sensitive to market developments these days than they were 5 to 10 years ago.”

For more analysis on the Hang Seng Index and global market trends, click here.

Commodities: Gold Hits Record High; Iron Ore Extends Losing Streak

Commodity markets had a mixed week as investors considered Trump’s tariff plans, Beijing’s stimulus outlook, Middle East tensions, and the Fed’s policy outlook.

• Gold gained 1.30% in the week ending March 21, climbing to a record high of $3,058 before pulling back and closing the week at $3,023. Safe haven demand and the Fed’s policy outlook drove prices higher.
• WTI crude oil prices advanced 1.02%, closing the week at $68.28.
• Iron ore prices declined by 1.82%, extending the losing streak to four weeks on tariff and demand concerns.

ASX 200 Mirrors Wall Street, Snaps Four-Week Losing Streak

The ASX 200 advanced by 1.82% in the week ending March 21, snapping a four-week losing streak. Banking, gold, and tech stocks led the gains.

• Banking sector: Falling 10-year US Treasury yields drove demand for high-yielding Aussie banks. ANZ (ANZ) and Westpac Banking Corp jumped 3.57% and 3.82%, respectively.
• Gold sector: Northern Star Resources Ltd. (NST) posted a 1.90% weekly gain.
• Tech Sector: The S&P/ASX All Technology Index rallied 1.84%.

Nikkei Index Rallies on Softer Inflation and Yen Weakness

Japan’s Inflation numbers and the outcome of the spring wage negotiations (Shunto) eased bets on a July Bank of Japan rate hike. Despite the dovish Fed stance, the USD/JPY gained 0.45% to close the week at 149.291. A softer Yen boosts the competitiveness of Japanese exports, improving corporate earnings prospects.

• Sony Corp. (6758) was among the front-runners, soaring 7.5% on the weaker Yen.
• Tech stocks advanced on Wall Street’s gains. Tokyo Electron (8035) soared 4.12%, while Softbank Group (9984) rose 1.58%.

Market Outlook: Key Events to Watch

The upcoming week will be crucial for Asian markets as economic data, central bank actions, and tariff developments shape investor sentiment. Key events include:

• US Tariffs: Trump’s shifting stance remains a key risk factor for global markets. Any further policy shifts will influence investor sentiment.
• Beijing Stimulus: Stimulus measures, aimed at boosting domestic consumption, could mitigate tariff risks, supporting demand for HK and Mainland-listed stocks.

With economic uncertainty and market volatility persisting, traders should closely monitor global macroeconomic trends and policy shifts here to navigate risks effectively.