This week, the performance of the Hang Seng Tech Index is expected to be primarily influenced by two factors: the earnings reporting window for major US technology companies and ongoing geopolitical tensions between the US and Iran. Following a sharp rebound in US stocks to record highs, and considering that market earnings-per-share (EPS) expectations have not yet been adjusted for geopolitical risks, whether these earnings reports exceed expectations is a critical variable for determining if the Hang Seng Tech Index can sustain its rebound.
According to a report dated the 27th from the Chen Meng team at Soochow Securities, the Hang Seng Tech Index led declines among major markets last week, falling 2.79%. The Hang Seng Index and the Hang Seng China Enterprises Index dropped 0.7% and 0.78%, respectively. Geopolitically, initial setbacks in US-Iran negotiation expectations and rising uncertainties surrounding the Strait of Hormuz suppressed market risk appetite. Subsequently, both sides signaled a potential de-escalation, leading the technology sector to exhibit a pattern of initial strength, followed by weakness, and then a partial recovery.
Looking ahead to this week, several major US tech giants, including Microsoft, Amazon.com, Meta Platforms, Inc., Alphabet, and Apple, are scheduled to release their earnings reports. This coincides with the release of key US economic data, such as the preliminary Q1 GDP figures and the Core PCE price index. Consequently, the validation of technology sector fundamentals and the impact of macroeconomic data will occur simultaneously. Meanwhile, Brent crude oil remains around $100 per barrel. Whether progress in US-Iran negotiations can boost global risk appetite represents another variable affecting the pace of overseas capital allocation into Hong Kong stocks.
Regarding investment strategy for Hong Kong equities, Soochow Securities currently recommends focusing on value and dividend-paying stocks as the core direction. Upstream AI technology hardware can serve as a value anchor, though its performance trajectory may be influenced by the US tech earnings reports. The firm also suggests paying attention to Chinese assets with global scarcity, such as new energy and innovative pharmaceuticals.
Hong Kong markets led declines last week, with pricing primarily driven by geopolitical risks and sector fundamentals. Major global markets showed mixed performance. The KOSPI, Nikkei 225, and Nasdaq indices were among the top gainers, while the French CAC 40, Euro Stoxx 50, and the Hang Seng Tech Index were among the biggest decliners. All three major Hong Kong stock indices closed lower for the week, with the Hang Seng Tech Index experiencing the steepest drop of 2.79%. The Hang Seng Index fell 0.7%, and the Hang Seng China Enterprises Index declined by 0.78%.
At the sector level, Energy (+3.8%) and Utilities (+2.3%) led the gains. In contrast, Healthcare (-5.2%), Non-essential Consumption (-3.8%), and Materials (-3.0%) were the worst-performing sectors.
Soochow Securities analysis indicates that last week's Hong Kong market movements were jointly dictated by geopolitical risks and industry fundamentals. Early in the week, dampened expectations for US-Iran talks and escalating maritime tensions increased uncertainty around the Strait of Hormuz, significantly reducing market risk appetite. Later, as both sides released conciliatory signals—with Iran denying internal divisions and emphasizing a shift in negotiation focus from nuclear issues to arrangements for a complete ceasefire—market sentiment showed signs of recovery.
In the energy sector, as geopolitical pricing sentiment subsided, the term premium for crude oil realigned with strong spot market fundamentals. Rising spot prices lifted the entire futures curve, allowing the energy sector to continue its leading performance. The technology sector displayed a "strong-weak-recovery" pattern: it started the week strong, buoyed by AI financing and robust semiconductor industry chain sentiment, then faced significant pressure mid-week as risk appetite waned, before partially recovering. The new energy vehicle sector weakened towards the end of the week as the market began scrutinizing its future sales support capabilities, indicating that some high-growth sectors are entering a phase of performance validation.
Regarding capital flows, southbound capital recorded a net inflow of HKD 16.8 billion last week, a decrease of HKD 9 billion from the previous period. However, the proportion of total Hong Kong stock turnover accounted for by Stock Connect trading increased from 43% to 46%, suggesting continued growing participation from mainland capital.
Sector-wise, southbound funds showed net inflows into the Financials, Energy, and Telecommunications sectors, while the Materials sector experienced net outflows. At the individual stock level, China Mobile, China Construction Bank, Industrial and Commercial Bank of China, and CNOOC saw net inflows. Conversely, Tencent Holdings, Geely Automobile, Xiaomi Group-W, and Aluminum Corporation of China (Chalco) recorded net outflows.
ETFs targeting the Hong Kong market from mainland China (via Hong Kong Stock Connect and QDII schemes) collectively saw a net inflow during the same period, with the total scale increasing to RMB 431.385 billion, up by RMB 1.361 billion. Specifically, Hong Kong Stock Connect ETFs had a net inflow of RMB 546 million, while QDII ETFs saw a net outflow of RMB 177 million. Net inflows were concentrated in thematic ETFs focused on pharmaceuticals and TMT (Technology, Media, and Telecom), whereas broad-based Hong Kong equity ETFs experienced a net outflow of RMB 207 million. Additionally, share buybacks in Hong Kong stocks amounted to HKD 2.8 billion this week, down HKD 300 million from the previous week. IPO fundraising reached HKD 27.7 billion, a significant increase of HKD 19.3 billion week-on-week. The market value of lifted share lock-ups was HKD 8.2 billion, a decrease of HKD 5.9 billion from the prior week.
Soochow Securities identifies two core variables that will determine whether the Hang Seng Tech Index can rebound.
First, whether the earnings reports from US tech giants exceed expectations. With US stocks having rebounded sharply to historic highs, and market EPS expectations for the tech sector not being downgraded since the start of the year due to geopolitical factors, the actual EPS delivery during the earnings season is crucial. The report notes that only earnings that surpass expectations can provide a rationale for further tech gains. Merely meeting or falling short of expectations could lead to a narrative adjustment for the tech sector, subsequently hindering the rebound momentum of the Hang Seng Tech Index. The consecutive earnings releases from Microsoft, Amazon.com, Meta Platforms, Inc., Alphabet, and Apple provide a concentrated validation window for the market, with AMD having reported on April 28th.
Second, whether US-Iran negotiations can achieve substantive progress. Recent signals, including cancelled diplomatic itineraries and an extended but not fully implemented ceasefire, alongside supply tensions caused by disruptions to shipping through the Strait of Hormuz, have kept Brent crude oil fluctuating at high levels around $100 per barrel. Soochow Securities points out that current US stock valuations barely reflect the potential impact of geopolitical conflicts on fundamentals. An unexpected short-term deterioration in the US-Iran situation could disrupt market momentum, affecting global capital's risk appetite and the pace of overseas fund allocation to Hong Kong stocks.
In the current environment, Soochow Securities advises that Hong Kong equity allocation should center on value and dividend stocks. Upstream AI technology hardware can act as a value anchor, but its performance is likely to fluctuate with the rhythm of US tech earnings. Furthermore, the firm recommends continuing to focus on Chinese assets with global scarcity, including new energy and innovative pharmaceuticals.
On the macroeconomic data front, this week will also see the密集release of the US preliminary Q1 GDP (April 29th), China's official PMI (April 29th), the US Core PCE Price Index (April 30th), and the US ISM Manufacturing PMI and China's Caixin Manufacturing PMI (May 1st). These data points may further influence market judgments regarding growth and inflation trajectories.
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