Hang Seng Tech Index Drops Amid Tariff Woes and Earnings – Weekly Recap

US Equity Markets Advance on Robust Economic Data

US equity markets rebounded in the week ending November 22, partially recovering losses from the previous week. The Dow gained 1.96%, while the Nasdaq Composite Index and the S&P 500 rose by 1.73% and 1.68%, respectively.

US economic data signaled a robust economy, countering rising geopolitical tensions.

US Economic Indicators Impact Fed Rate Path

Upbeat US labor market data, Services PMI numbers, and improving consumer sentiment fueled demand for US-listed stocks.

The US S&P Global Services PMI increased from 55.0 in October to 57.0 in November. Accounting for around 80% of the US economy, the upswing in service sector activity indicated a robust US economy.

Tighter labor market conditions and improving consumer sentiment signaled stronger private consumption, which accounts for around 70% of US GDP.

Positive sentiment toward the US economy countered falling bets on a December Fed rate cut, supporting gains across US equity markets.

China’s PBoC Holds Rates as Economic Uncertainty Grows

On Wednesday, November 20, the People’s Bank of China kept the 1-year and 5-year loan prime rates (LPR) at 3.1% and 3.6%, respectively. The decision to maintain the LPRs coincided with increasing uncertainty about China’s economic outlook. President-elect Trump’s plans to impose tariffs on Chinese goods threaten China’s hopes of achieving its 5% growth target.

Beijing held back from introducing fresh stimulus measures to boost consumption, which also weighed on HK and Mainland China-listed stocks.

Expert Views on China’s Economy and Corporations

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero noted that while local government debt restructuring is positive, significant policy action is needed to restore corporate profitability and confidence. She emphasized that persistent deflationary pressures and restrictive trade policies are key risks for Chinese corporates.

Hang Seng Index Struggle Amid Tariff Woes and Weak Earnings

The Hang Seng Index extended its losses from the previous week, declining by 1.01% in the week ending November 22. The ongoing threat of US tariffs on Chinese goods and corporate earnings impacted demand for HK-listed stocks.

Tech heavyweight Baidu (9888) reported its most marked sales decline over two years. Alibaba (9988) also saw significant losses after news of PDD Holdings warning of intensifying competition in the e-commerce space.

The Hang Seng Tech Index (HSTECH) ended the week down 1.89%, after tumbling 7.29% the previous week. Baidu declined by 6.81% in the week, while Alibaba slid by 7.45%.

Real estate stocks also struggled amid uncertainty about policy measures bolstering the housing market. The Hang Seng Mainland Properties Index ended the week down 4.34%.

On the Mainland, US tariffs and concerns about China’s economic outlook weighed on the equity markets. The CSI 300 declined by 2.60%, while the Shanghai Composite fell by 1.91%.

Commodities: Gold Surges Amid Geopolitical Tensions

Commodity markets had a more favorable week. Iron ore spot advanced by 0.34% despite concerns about US tariffs on China. An escalation in the Ukraine war drove demand for Gold, which rallied 5.97% to end the week at 2,716.

Russia threatened a nuclear response following Ukraine’s recent missile attack, signaling a potential escalation in the ongoing war.

ASX 200 Hits an All-Time High

The ASX 200 tracked the US equity markets, advancing by 1.31% in the week ending November 22. Significantly, the Index climbed to an all-time high of 3,917.5 before easing back to close at 3,840.6.

While the gains were broad-based, gold-related stock Northern Star Resources Ltd. (NST) surged 12.93% on the upswing in gold prices. Woodside Energy Group Ltd. (WDS) rallied 4.38% as rising geopolitical risks resulted in higher oil prices.

Mining giants Fortescue Ltd. (FMG) and Rio Tinto Ltd. (RIO) saw gains of 3.27% and 3.02%, respectively, due to the rise in iron ore prices.

Nikkei Index Succumbs to BoJ Uncertainty

In the week ending November 22, the Nikkei Index dipped by 0.93% to 38,284. The Nikkei Index saw losses despite the USD/JPY advancing by 0.28% to 154.707.

Key economic indicators influenced sentiment toward the Bank of Japan rate path. Japan’s annual inflation rate eased from 2.5% in September to 2.3% in October but remained above the BoJ’s 2% target. The inflation figures supported a potential December interest rate hike.

Service sector data also bolstered the case for a December BoJ rate hike as the Services PMI increased from 49.7 in October to 50.2 in November. Japan’s services sector accounts for over 70% of GDP and remains a BoJ focal point. BoJ Governor Kazuo Ueda recently remarked on the significance of service sector data, stating,

“October is a month when service price revisions are concentrated in Japan, so we must scrutinize data carefully.”

Main contributors to the weekly loss included Tokyo Electron (8035), which slipped by 0.22%, while SoftBank Group Corp. (9984) slid by 3.74%. Nissan Motor Corp. (7201) tumbled by 5.18%.

Outlook

Key upcoming events, including PBoC rate decisions, China’s industrial profits, Tokyo inflation, Aussie inflation, and central bank forward guidance, could influence market sentiment. Beijing stimulus-related chatter, the Ukraine War, and the Fed rate path also need consideration. Follow our latest updates to stay informed and manage your risks effectively.