Investment 4/8/2025

Hong Kong stocks opened August lower, marking the fourth consecutive day of decline. The Hang Seng Index opened 28 points, or 0.12%, lower, hovering between 24,700 and 24,850 points in the early trading session. The decline intensified significantly in the afternoon, closing at 24,507 points, down 265 points, or 1.07%. The Tech Index fell 55 points, or 1.02%, to 5,397 points. Main Board turnover was HK$254.6 billion.


For the week, the Hang Seng Index fell 880 points, or 3.4%, while the Tech Index fell 280 points, or 4.9%.


Last week, the Hang Seng Index fell back below the previous March peak of 24,874 with a large bearish candlestick pattern. On Friday, it fell below the 20-day moving average (24,750). Today's 50-day moving average (24,196) is crucial. A break below this level could lead to a drop of over 1,000 points, to the 23,000 level. In fact, after more than 15 weeks of gains, the Hang Seng Index has already reached 6,475 points. Therefore, if buying becomes increasingly conservative, profit-taking will inevitably follow, leading to a period of market volatility. We anticipate continued volatility in early August.


If Sino-US trade relations improve, the medium-term outlook for Hong Kong stocks will be favorable. Recent trends in the US, mainland, and Hong Kong stock markets have all been bearish. In a market characterized by simultaneous declines in highs and lows, speculators' profit-seeking strategy should naturally be to wait for rallies and sell off, while investors should have already implemented their planned phased selling.


European stock markets fell across the board, led by pharmaceutical stocks. UK, French, and German stocks fell 0.7%, 2.91%, and 2.66%, respectively.


The latest US employment data was weak: non-farm payrolls increased by only 73,000 in July, below market expectations of 104,000, and averaging only 35,000 jobs over the past three months. The US unemployment rate rose to 4.2%, the lowest level since the end of the COVID-19 pandemic. Combined with Washington's implementation of reciprocal tariffs on multiple countries and regions, sparking economic concerns, US stocks came under significant pressure on Friday. The Dow Jones Industrial Average opened 349 points lower, then fell as much as 790 points, reaching a low of 43,340. The S&P 500 fell 2% at one point, while the tech-heavy Nasdaq Composite Index rallied 2.66%. The VIX volatility index, commonly known as the "fear index," surged 31% to 21.9.


At the close of trading, the Dow Jones Industrial Average was at 43,588, down 542 points, or 1.23%. The S&P 500 fell 101 points, or 1.6%, to 6,238. The Nasdaq Composite dropped 472 points, or 2.24%, to 20,650.


After the FOMC meeting, Powell stated that strong employment did not require an interest rate cut. The CME Fed tool predicts the probability of a September rate cut has fallen below 50%. However, many observers still hold out hope for a September rate cut. Fed governors dissented from the decision, the last time two governors dissented was more than 30 years ago.

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