Hong Kong's stock market wrapped up the first half of the year on a volatile note, with the three major indices experiencing a sudden late-session plunge on the final trading day of June. Despite this, the broader six-month performance remained robust, driven by significant breakouts in new consumption and stablecoin concepts, alongside notable showings from rare earth and gold-related stocks.
Market Performance Overview
The Hang Seng Index (HSI) closed June down 0.87%, narrowly holding above the 24,000-point mark. The Hang Seng China Enterprises Index (HSCEI) and the Hang Seng Tech Index (HSTECH) also fell, declining by 0.96% and 0.72%, respectively, reflecting subdued daily market sentiment.
However, June concluded positively overall, capping a strong first half. The HSI, HSCEI, and HSTECH recorded cumulative gains of 3.36%, 2.92%, and 2.56% for the month, respectively. Over the first six months, these indices surged impressively, posting increases of approximately 20%, 19.05%, and 18.68%.
Key Sector Movements
Technology and Large-Cap Stocks
Large technology stocks displayed mixed performances. Xiaomi and NetEase saw gains of over 1%, while Meituan dropped more than 3%, Alibaba fell over 2%, and Tencent and JD.com experienced slight declines.
Cryptocurrency and Stablecoin Concepts
Cryptocurrency-related stocks were particularly vibrant. New Huo Technology Holdings surged over 31%, Guotai Junan International rose more than 13%, and OKG Technology Holdings gained over 12%. This rally followed regulatory developments, including the U.S. Senate's passage of stablecoin legislation (pending House approval) and Hong Kong's enactment of a stablecoin bill in May. South Korea's President also pledged to allow local companies to issue such tokens.
Pharmaceutical Outsourcing
The contract research organization (CRO) sector advanced sharply. WuXi AppTec's subsidiary, Pharmaron, jumped over 12%, Tigermed Consulting surged more than 7%, and Asymchem Laboratories climbed over 5%. These moves came after China's National Medical Products Administration proposed shortening the review period for innovative drug clinical trial applications from 60 to 30 days. Analysts from HSBC and China Merchants Securities highlighted policy support and shifting global demand toward China's efficient clinical trial industry as key tailwinds.
Aerospace, Defense, and Military Stocks
Sectors tied to aerospace and defense remained active. China Aviation Industry Corporation rose over 6%, AVIC Helicopter gained nearly 4%, and China CSSC Holdings Limited followed positively. Analysts linked this strength to escalating global geopolitical tensions and anticipation around military modernization cycles.
Precious Metals and Banking Shares
Gold and precious metal stocks declined. Dragon Mining fell over 3%, while Zijin Mining Group and Shandong Gold Mining dropped more than 2%. Spot gold prices dipped, losing the $2,260 per ounce level. In banking, Tianjin Bank plummeted over 43%, and China Construction Bank retreated 2%, partly due to profit-taking after substantial yearly gains and tempered expectations for near-term interest rate cuts.
Automotive Sector
Automotive stocks were among the worst performers. Li Auto declined over 3%, Leapmotor and Beijing Automotive Group fell more than 2%, and XPeng Motors, Great Wall Motor, and BYD Company slid over 1%. Analysts pointed to fading electrification benefits and the ongoing transition toward intelligent driving technologies as sector headwinds.
Capital Flows and Investor Sentiment
Southbound capital flows remained positive, with a net purchase of HKD 5.22 billion via the Stock Connect program. This included HKD 2.393 billion through the Shanghai-Hong Kong link and HKD 2.826 billion via the Shenzhen-Hong Kong link.
Market Outlook and Risk Factors
Looking ahead, institutions like Standard Chartered Wealth Management warn of potential downside risks, including unresolved Middle East geopolitical tensions, U.S. tariff policies, inflation concerns, and debt-related uncertainties.
Despite these challenges, many analysts maintain optimistic year-ahead targets. The Hang Seng Index is projected to reach 25,500 points, while the S&P 500 and NASDAQ 100 are eyed at 6,410 and 23,650 points, respectively. The Euro Stoxx 50 is forecasted to hit 5,550 points.
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Frequently Asked Questions
What drove the strong performance of Hong Kong stocks in the first half?
The market was boosted by sectors like new consumption, stablecoins, and renewables, alongside supportive policies and global capital inflows seeking growth opportunities.
Which sectors showed the most volatility in June?
Cryptocurrency-related stocks, pharmaceutical outsourcing, and banking shares experienced significant swings due to regulatory news and profit-taking activities.
How did southbound capital flows impact the market?
Consistent net purchases through Stock Connect programs provided liquidity support, helping stabilize the market during periods of volatility.
What are the key risks for Hong Kong stocks in the near term?
Major risks include geopolitical tensions, changes in U.S. monetary policy, inflationary pressures, and potential delays in expected rate cuts.
Why did gold and banking stocks decline despite earlier gains?
Both sectors faced technical corrections after strong rallies, with gold pressured by dollar strength and banking shares adjusting to reduced rate cut expectations.
What is the outlook for the automotive sector in Hong Kong stocks?
Analysts expect a shift toward investing in智能化 (intelligent) technologies and robotics, as traditional electrification advantages diminish.