Introduction
The HangSeng Index (HSI) opened lower on Friday, August 1, 2025, extending a
potential three‑day losing streak. A confluence of strong U.S.
inflation data and weak China PMI readings dampened market
sentiment, pushing the benchmark toward its critical technical support around 24,500.
Despite losses in EV and tech stocks, gains in heavyweight names like Alibaba
and Baidu helped limit the downside. Meanwhile, Beijing reiterated its
commitment to stimulus measures as economic pressures mount.
Market Recap: Fed Rate Fears Combine with China PMI Weakness
Investors woke
up cautiously after U.S. economic data cast doubt on a September Federal
Reserve rate cut. The Core PCE Price Index for June rose 2.8%
year‑on‑year, matching May’s increase and exceeding expectations of 2.7%.
Spending and income also rebounded, reducing expectations of near‑term easing.
According to the CME FedWatch Tool, the odds of a September cut slipped
from 47.6% on July 30 to 41.2% on July 31.
These
developments weighed heavily on the Hang Seng Index, which fell early on
Friday, mirroring losses in U.S. markets, where the Dow slid 0.74%, the S&P
500 fell 0.37%, and the Nasdaq Composite inched down 0.03%. Notably
though, corporate results from Meta (META, +11.25%) and Microsoft (MSFT,
+3.95%) helped cap broader losses in U.S. tech.
At the same
time, weak Chinese growth indicators intensified concerns. The S&P
Global China Manufacturing PMI dipped from 50.4 in June to 49.5 in July,
slipping below the 50 mark and signaling contraction. Declines in export
orders, employment, and rising input prices further pointed to slowing
momentum, reflecting lingering trade headwinds and domestic pressures. Beijing,
in response, reassured investors with policy pledges aimed at stabilizing labor
and price conditions to bolster private consumption.
Diverging Performance: Hong Kong vs Mainland China
By mid‑morning
trading, the Hang Seng Index had declined 0.26% to about 24,710,
recovering modestly from an intraday low of 24,693. Meanwhile, Mainland
benchmarks diverged, with the CSI 300 up 0.04% and the Shanghai
Composite up 0.02%. That resilience was fueled by hopes for fresh
policy measures from Beijing, even as sentiment turned cautious globally.
Sector Movements: EV and Tech Slip, Big Caps Hold
The tech and EV
sectors came under pressure. BYD (1211) fell 0.26%, Li Auto
(2015) dropped 2.22%, and Tencent (0700) slipped 0.18% weighing
on the index. On the other hand, Alibaba (9988) and Baidu (9888)
posted gains of 1.99% and 2.13%, respectively, providing much‑needed
support amid declines elsewhere.
These
contrasting performances underscored a rotation: while growth‑oriented EV/tech
names lost sheen, mega‑caps with strong earnings kept sellers at bay.
China Manufacturing PMI: Flashing Warning Signs
The manufacturing
PMI reading of 49.5 for July represented a notable deterioration. Since
many traders watch the 50 threshold as the growth/contraction dividing line,
this data unnerved investors. Survey highlights included:
- Weaker new export orders
- Falling employment
- Higher input costs
These trends
reflect trade pressures and rising costs that could dampen momentum unless
offset by stronger domestic demand. In response, Beijing reiterated policy
pledges focused on boosting labor stability and addressing domestic
price insecurity to support consumption.
Technical Setup: Key Levels to Watch
Technically, the Hang Seng Index has dipped toward the July transition zone, but it remains just above the 50‑day Exponential Moving Average (EMA) a sign that bulls retain a slight edge. Resistance and support levels appear as follows:
| Level | Significance |
|---|---|
| Resistance | 25,000 → 25,500 → 25,736 (July high) |
| Support | 24,500 → 50-day EMA (~24,254) |
If stimulus
arrives or trade tensions ease, a hold above 25,000 could extend gains toward
25,736. On the downside, a failure of support near 24,500 might open risk for
further pullback.
Outlook: Stimulus, Trade, and Economic Calendar in Focus
Looking ahead,
key drivers include:
- China’s services‑sector PMI (due August 5)
- Trade data releases (exports/imports) on August 7
- New Beijing stimulus policies
- U.S.–China trade developments
These factors
will determine if the Index holds above support or cracks deeper and whether
bulls can rally toward 26,000 once more.
Beijing’s
policy response will be especially crucial. While the government has pledged
support, effective fiscal or monetary stimulus is needed to buoy consumer
demand and offset external headwinds. In the absence of progress on a trade
front, that stimulus may be the difference between a rebound or a slide toward
24,500.
Narrative Summary
The Hang Seng retreat reflects a tug‑of‑war between weak external economic signals and hopes
for internal policy support. On one side, hotter U.S. inflation readings and
cooled China PMI numbers dent expectations for near‑term Fed easing and signal
slowing Chinese growth. On the other, major Chinese policymakers continue to
promise backing for employment, prices, and consumption a possible lifeline.
If upcoming
China data and trade talks yield positive surprise, risk appetite may return,
giving bulls a path back above 25,000. Otherwise, the index risks
retesting support and falling toward the lower 50-day EMA around 24,254.
Final Thoughts
Traders and
investors should monitor:
- U.S. inflation trajectory and Fed
communication
- China’s upcoming PMI and trade
release
- Timelines and substance of
Beijing’s policy response
- Developments in U.S.–China trade
negotiations
Sentiment and
thus the Hang Seng Index direction hinges squarely on those near‑term
catalysts. For now, the market remains alert but cautious, balancing between
fear of policy delays and hope for meaningful stimulus.
