Hang Seng Index News: Tariffs and Margin Pressures Rattle Tech Stocks – Weekly Recap

Middle East Ceasefire Shifts Focus to US Jobs and Fed Rate Bets

Wall Street eyes September as Fed rate cut odds falter—while China battles EV stock turmoil.

Market focus shifted from the Middle East to the US labor market and the Fed as Iran and Israel upheld the ceasefire. Weaker-than-expected numbers from the ADP supported bets on a September Fed rate cut, while the US Jobs Report signaled a resilient labor market, driving demand for US equities.

Meanwhile, weaker overseas demand for Chinese goods and services and margin pressures weighed on Hong Kong-listed tech and electric vehicle (EV) shares.

The Hang Seng Index partially reversed its gains from the previous week, logging weekly losses in three of the last twelve weeks.

Following last week’s private sector PMIs and the US Jobs Report, investor focus now turns to tariff moves, Chinese economic data, and central bank policy signals.

Mainland Markets Climb on Stimulus Hopes Despite PMI Warnings

US equities extended their gains in the week ending July 3, with the Nasdaq Composite Index up 1.62%. A resilient US labor market and initial hopes of a Fed rate cut bolstered demand for risk assets.

Mainland markets also trended higher, with the CSI 300 and Shanghai Composite Index ending the week up 1.54% and 1.40%, respectively. Hopes of fresh stimulus from Beijing to target the labor market and domestic consumption drove demand for Mainland stocks.

Meanwhile, the Hang Seng Index declined 1.52% to end the week at 23,916. China’s Caixin private sector PMI numbers highlighted intensifying competition and price pressures, potentially exacerbating ongoing margin issues.

Hong Kong Tech and EV Stocks Sink on Margin Pressures

Investors dumped EV and tech stocks amid increasing concerns about intensifying competition and price wars. The Hang Seng Tech Index slid 2.34%, partially reversing the previous week’s 4.06% gain. Tech giant Alibaba (9888) plunged 6.24%, while JD.com (09618) dropped 4.68%.

EV stocks also faced heavy selling pressure. Li Auto (2015) fell 6.24%, while BYD (1211) declined by 2.17%.

China’s Private Sector Struggles With Weak Demand and Rising Costs

The crucial Caixin Manufacturing and Services PMIs faced market scrutiny after the US and China agreed to ease trade restrictions. The Caixin Manufacturing PMI rose from 48.3 in May to 50.4 in June, crucially moving above the 50 neutral level. Meanwhile, the Caixin Services PMI dropped from 51.1 in May to 50.6 in June.

The two surveys revealed several common themes: Weakening overseas demand, a deteriorating labor market, and price pressures. These trends could force Beijing to introduce new stimulus targeting the labor market and consumption.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero remarked:

“Cost of over-competition- but also US tariffs, clearly hurting Chinese companies. Corporate profits fell 9.1% in May. Unsustainable without additional subsidies.”

While some export restrictions have eased, tariffs on Chinese goods remain in place, potentially further pressuring demand for Chinese goods. The US-Vietnam trade deal could also be a concern for Chinese manufacturers. Vietnam agreed to a 40% US levy on trans-shipments through Vietnam to the US.

US Jobs Report Eases Recession Fears but Muddles Fed Rate Path

Weaker-than-expected ADP numbers supported September Fed rate cut bets, while the US Jobs Report signaled labor market resilience, tempering those expectations.

On July 2, the ADP reported a 33k drop in private employment in June, reversing a 29k rise in May.

Meanwhile, the US Jobs Report showed nonfarm payrolls increased 147k in June after rising 144k in May. The unemployment rate fell from 4.2% to 4.1%, though a lower participation rate contributed to the drop.

According to the CME FedWatch Tool, the chances of a September Fed rate cut fell from 91.4% on June 27 to 69.4% on July 4. The chances of a September rate cut had hit 96% ahead of the Jobs Report.

Hang Seng Faces Key Test Between 23,000 Support and 24,500 Resistance

Fed policy uncertainty and concerns about overseas demand and margin pressures dragged the Hang Seng Index below the crucial 24,000 support level. Despite the pullback, the Index avoided a drop below the 50-day Exponential Moving Average (EMA), affirming bullish price signals.

Discussions about the US removing tariffs on China, strong Chinese economic data, or fresh stimulus from Beijing could send the Hang Seng Index above 24,000. A sustained move through 24,000 may pave the way to the June high of 24,533, bringing the March high of 24,874 into sight.

Conversely, weak China data, concerns over tariffs and margins, and the absence of fresh stimulus could push the Index below the 50-day EMA, exposing the crucial 23,000 support level.

Hang Seng Technical Forecast: Cautiously Bullish With Tariff Risks

• Resistance: 24,439, 24,874, and then 25,000.
• Support: 50-day EMA at 23,512 and 23,000.
• Bias: Cautiously bullish in the short term, hinged on US-China tariff developments, Beijing’s stimulus moves, and economic data from China.

Forecast Summary

The Hang Seng traded above its May and early June congestion zone. In the week ahead, key economic data from China, including inflation and vehicle sales, will influence sentiment. However, trade developments and Beijing’s stance on further stimulus could be pivotal for market trends.

For real-time updates on US-China trade talks, global stimulus efforts, and central bank signals, follow our live coverage and consult our economic calendar.