[ET Net News Agency, 30 April 2025] With positive performance in overseas stock markets, Hong Kong stocks maintained consolidation ahead of the Labour Day holiday, awaiting the release of a series of significant economic data from the US. The main board recorded over HKD 112.7 billion in turnover for the half-day session. Some blue-chip stocks saw speculative trading; however, domestic banks faced selling pressure due to a significant narrowing of net interest margins, dragging down the performance of Hong Kong stocks. The Hang Seng Index reported 22,056, up 47 points or 0.2%. The Hang Seng China Enterprises Index stood at 8,037, down 30 points or 0.4%. The Hang Seng Tech Index was at 5,072, up 53 points or 1.1%.
"Southbound capital has seen continuous outflows, causing weakness in Hong Kong stocks"
In March, US job vacancies dropped from 7.48 million in February to 7.19 million, the lowest since September last year, and below the expected 7.5 million. The Conference Board's consumer confidence index for April fell from 93.9 in March to 86, hitting a nearly five-year low and missing expectations of 88. Additionally, the US trade deficit for March unexpectedly widened to a record high of USD 162 billion, up from USD 147.9 billion in February, and significantly exceeding the expected USD 145 billion. However, optimism about progress in trade negotiations helped US stocks rebound on Tuesday, with all three major indices rising.
The Hang Seng Index opened 30 points higher this morning; however, the manufacturing PMI for April from the Mainland China dropped to 49, below the market expectation of 49.7, a decrease of 1.5 percentage points from last month's 50.5, prompting a reversal in the index. Lee Wai Kit, a director of the Brokerage Department of TF International Securities, told ET Net News Agency that the decline in the Hang Seng Index was not surprising, as the index had already accumulated a certain rise from its low levels. Recently, Hong Kong stocks have been rebounding, with southbound capital playing a significant role. However, with the Labour Day holiday approaching, signs of outflows from southbound capital were evident, as there were net outflows over the last two days and yesterday (29th), slightly reducing the upward momentum of Hong Kong stocks. Coupled with selling pressure following domestic banks' earnings reports, the Hang Seng Index struggled to rebound.
Lee Wai Kit pointed out that after the Labour Day holiday, if progress is made in US-China tariff negotiations, the market may see further gains. However, both sides are currently reluctant to initiate negotiations, making the situation somewhat complex. It will depend on which side can endure the pain longer or if certain conditions trigger negotiations, leading to a potential breakthrough in tariff issues. With investor sentiment cooling before the long holiday and US-China trade talks stalled, the market lacks direction, and the Hang Seng Index is expected to fluctuate around 22,000 points. In this context, investors may prefer to trade specific stocks rather than the market as a whole, with emerging sectors such as retail consumption and possibly automotive or tech stocks becoming targets for speculation.
"Domestic banks are expected to find support if they pull back to early-month lows"
Domestic banks collectively reported first-quarter results: China Construction Bank (00939) and Industrial and Commercial Bank of China (01398) saw net profits drop by 4%, Bank of China (03988) reported a 2.9% decline in profit, and Postal Savings Bank (01658) recorded a 2.6% decrease. CM Bank (03968) also saw a 2.1% profit drop. Among the six major banks, only Agricultural Bank of China outperformed, posting over 2% growth in net profit. Additionally, regarding net interest margins, China Construction Bank's net interest margin decreased by 16 basis points year-on-year, while Industrial and Commercial Bank of China and Bank of China both saw declines of 15 basis points, and Agricultural Bank of China decreased by 10 basis points.
This morning, the six major banks faced heavy selling pressure, with ICBC, China Merchants Bank, and Postal Savings Bank falling by as much as 6%, while CCB and ABC also saw declines of around 5%. Lee Wai Kit noted that the sharp drop in domestic banks is due to poor first-quarter results and a narrowing of net interest margins, compounded by significant price increases over the past period, prompting a correction. He pointed out that domestic bank stocks have generally outperformed the market in recent years, even during substantial adjustments in the Hang Seng Index during the pandemic, with domestic banks experiencing smaller declines and significantly higher subsequent gains.
However, Lee Wai Kit mentioned that aside from Agricultural Bank of China, the other major banks still offer around 6.5% returns, and as long as they maintain returns around 6%, they remain attractive to investors. Therefore, he expects the recent decline in domestic banks will not be too severe. If stock prices fall to early-month levels - where they were during the onset of the trade war - they present a certain level of attractiveness. He added that even though Agricultural Bank performed relatively well compared to other banks, its dividend yield of just over 5% is lower than that of its peers, reducing its appeal to investors.
"Southbound capital has seen continuous outflows, causing weakness in Hong Kong stocks"
In March, US job vacancies dropped from 7.48 million in February to 7.19 million, the lowest since September last year, and below the expected 7.5 million. The Conference Board's consumer confidence index for April fell from 93.9 in March to 86, hitting a nearly five-year low and missing expectations of 88. Additionally, the US trade deficit for March unexpectedly widened to a record high of USD 162 billion, up from USD 147.9 billion in February, and significantly exceeding the expected USD 145 billion. However, optimism about progress in trade negotiations helped US stocks rebound on Tuesday, with all three major indices rising.
The Hang Seng Index opened 30 points higher this morning; however, the manufacturing PMI for April from the Mainland China dropped to 49, below the market expectation of 49.7, a decrease of 1.5 percentage points from last month's 50.5, prompting a reversal in the index. Lee Wai Kit, a director of the Brokerage Department of TF International Securities, told ET Net News Agency that the decline in the Hang Seng Index was not surprising, as the index had already accumulated a certain rise from its low levels. Recently, Hong Kong stocks have been rebounding, with southbound capital playing a significant role. However, with the Labour Day holiday approaching, signs of outflows from southbound capital were evident, as there were net outflows over the last two days and yesterday (29th), slightly reducing the upward momentum of Hong Kong stocks. Coupled with selling pressure following domestic banks' earnings reports, the Hang Seng Index struggled to rebound.
Lee Wai Kit pointed out that after the Labour Day holiday, if progress is made in US-China tariff negotiations, the market may see further gains. However, both sides are currently reluctant to initiate negotiations, making the situation somewhat complex. It will depend on which side can endure the pain longer or if certain conditions trigger negotiations, leading to a potential breakthrough in tariff issues. With investor sentiment cooling before the long holiday and US-China trade talks stalled, the market lacks direction, and the Hang Seng Index is expected to fluctuate around 22,000 points. In this context, investors may prefer to trade specific stocks rather than the market as a whole, with emerging sectors such as retail consumption and possibly automotive or tech stocks becoming targets for speculation.
"Domestic banks are expected to find support if they pull back to early-month lows"
Domestic banks collectively reported first-quarter results: China Construction Bank (00939) and Industrial and Commercial Bank of China (01398) saw net profits drop by 4%, Bank of China (03988) reported a 2.9% decline in profit, and Postal Savings Bank (01658) recorded a 2.6% decrease. CM Bank (03968) also saw a 2.1% profit drop. Among the six major banks, only Agricultural Bank of China outperformed, posting over 2% growth in net profit. Additionally, regarding net interest margins, China Construction Bank's net interest margin decreased by 16 basis points year-on-year, while Industrial and Commercial Bank of China and Bank of China both saw declines of 15 basis points, and Agricultural Bank of China decreased by 10 basis points.
This morning, the six major banks faced heavy selling pressure, with ICBC, China Merchants Bank, and Postal Savings Bank falling by as much as 6%, while CCB and ABC also saw declines of around 5%. Lee Wai Kit noted that the sharp drop in domestic banks is due to poor first-quarter results and a narrowing of net interest margins, compounded by significant price increases over the past period, prompting a correction. He pointed out that domestic bank stocks have generally outperformed the market in recent years, even during substantial adjustments in the Hang Seng Index during the pandemic, with domestic banks experiencing smaller declines and significantly higher subsequent gains.
However, Lee Wai Kit mentioned that aside from Agricultural Bank of China, the other major banks still offer around 6.5% returns, and as long as they maintain returns around 6%, they remain attractive to investors. Therefore, he expects the recent decline in domestic banks will not be too severe. If stock prices fall to early-month levels - where they were during the onset of the trade war - they present a certain level of attractiveness. He added that even though Agricultural Bank performed relatively well compared to other banks, its dividend yield of just over 5% is lower than that of its peers, reducing its appeal to investors.