This morning, the downward trend in Hong Kong stocks has intensified, with the Hang Seng TECH Index dropping over 3% at one point and falling below the support of the 20-day and 30-day moving averages. The Hang Seng Index also dropped nearly 2%, with NIO at one point falling over 8% and Semiconductor Manufacturing International Corporation dropping more than 7%. Recently, there has been an indication in the Hong Kong stock market that after performance releases, there has been a cash-out of shares, which may be related to overly high expectations prior, as well as the investment behavior of southbound funds.

So, what exactly happened? Analysts believe that on one hand, there has been apprehension in previously hot sectors leading to profit-taking sentiments; on the other hand, the market is gradually entering the period for annual and quarterly report disclosures, causing some companies' performance to be viewed with caution. Furthermore, from an external perspective, Trump has stated that he will impose extensive reciprocal tariffs on April 2, as well as additional tariffs on specific industries. This could bring significant uncertainty to the global market.

Overall market pullback.

The driving force behind this round of the bull market is actually Hong Kong stocks, but in the recent few trading days, there has been a noticeable lack of buying momentum in Hong Kong stocks. On March 21, the downward momentum of Hong Kong stocks further expanded, with the Hang Seng TECH Index dropping over 3%, NIO-SW falling over 8%, Semiconductor Manufacturing International Corporation dropping over 7%, and the Hang Seng Index declining nearly 2%.

As a result, the A50, which surged in early trading, also experienced a significant plunge, with a drop of 1%. At the same time, the A-share market was also affected. As of the lunchtime close, the Shanghai Composite Index fell 0.94% to 3376.96 points; the Shenzhen Component Index dropped 1.42% to 10725.07 points; the Chinext Price Index fell 1.70% to 2162.57 points; the SSE Science and Technology Innovation Board 50 Index decreased 2.02% to 1043.23 points; the North Star 50 Index dropped 3.14% to 1319.75 points.

In the overall market, there were 976 stocks that rose and 4316 stocks that fell, with 44 stocks hitting the limit up. The total transaction volume for both markets in half a day reached 960.5 billion. Robot concept stocks led the decline, while Consumer Electronics, AI computing power, Semiconductors, Xiaomi Autos, Charging Stations, three-child policies, and Solid State Battery themes saw significant losses; only deep-sea technology concept stocks strengthened against the trend.

So, what exactly happened? In recent trading days, the global market dynamics have actually changed somewhat. After Buffett increased his holdings in Japan, the Nikkei/Yen has shown a noticeably strong performance recently. As of 11:30, major Asia-Pacific stock indices collectively rose, with the Nikkei 225 Index up 0.37% to 37890.42 points, and most constituent stocks rising, with 53 stocks increasing over 1% and 24 stocks declining over 1%. The Indian stock market has also recorded four consecutive ups recently. Based on the market trends of the past six months, other Asia-Pacific stock markets have a seesaw effect with China's stock market, suggesting that after the recent rally of core assets in Hong Kong stocks, some hedging funds may have cashed out their shares and flowed towards the Japanese and Indian stock markets.

On the other hand, external uncertainties are indeed increasing. US President Trump stated that he will impose broad reciprocal tariffs on April 2 and impose additional tariffs on specific industries. Trump said, "In certain cases, foreign goods imported into the USA will be subjected to both types of tariffs. They tax us, and we tax them; in addition to tariffs on Autos, Steel, and Aluminum, we will also impose tariffs on other industries."

How will the market interpret this?

Then, how should the market proceed next?

First, from the internal structure of the market, today's stock market decline did not lead to a significant rise in government bonds. Most government bond futures fell at midday, with the 30-year main contract rising by 0.08%, the 10-year main contract falling by 0.07%, the 5-year main contract falling by 0.06%, and the 2-year main contract falling by 0.02%. This implies that the risk appetite of funds may not have decreased too quickly. Secondly, this market decline is clearly due to investors' concerns about performance reports and external uncertainties, triggering a sentiment for profit-taking. Moreover, historically, unless it is a super bull market, trading operations in April and May are generally quite challenging.

However, this year’s attitude toward stabilizing growth is clear and firm. Guoyuan Securities believes that the economic data for January and February this year is generally stable, and it was achieved even under the disturbance of working days (this year there were 38 working days in January and February, compared to 40 working days during the same period last year), demonstrating the resilience of the economy. However, the current recovery is still relatively mild, and with the gradual impact of US tariff increases becoming apparent, achieving the annual growth target of around 5% still requires policy support and accelerated implementation. Recently, whether in this year's government work report or the subsequent "Special Action Plan to Boost Consumption," there has been a clear emphasis on a resolute attitude toward stabilizing growth.

Goldman Sachs also previously expressed a bullish outlook on the A-share market (such as the CSI 300 Index), expecting the target point for the CSI 300 to be around 4600 by the end of 2025. They believe that the Chinese government's policy support (such as fiscal stimulus and monetary easing) will drive profit growth and valuation recovery. Goldman Sachs tends to believe in the long-term effects of policy dividends, which is also the confidence and mindset needed by the market.

Editor/lambor