The stock market's rollercoaster ride continues! After a turbulent Friday, the Hang Seng Index (HSI) in Hong Kong bounced back on Monday, offering a glimmer of hope to investors. But here's where it gets controversial: some strategists believe this rebound might be short-lived, and the real story lies in the underlying tensions between the world's economic giants.
Let's dive into the details. On October 13, 2025, equity strategists highlighted the solid long-term fundamentals of the global stock market. They suggested that the recent sell-off in the US market, which saw the HSI open 656 points lower, was more of a temporary friction between the US and China rather than a full-blown trade war escalation. The HSI recovered some losses by the afternoon, closing at 25,889 points, a 1.5% tumble from the previous day's close.
The Hang Seng China Enterprises Index, a key indicator of Chinese mainland companies, also took a hit, falling 1.5% to 9,222 points. Meanwhile, the Hang Seng TECH Index, tracking Hong Kong's technology stocks, plummeted 1.8% to 6,145 points.
The catalyst for this market movement? US President Donald Trump's announcement on October 10, 2025, that the US would impose additional tariffs and export controls on Chinese products, effective November 1. This move was in response to China's tightened rare earths export controls and its perceived reluctance to purchase American soybeans.
This announcement sent shockwaves through global markets, causing a 2.7% slump in the S&P 500 Index, the sharpest one-day correction in six months. The Dow Jones Industrial Average and NASDAQ 100 Index also tumbled, shedding 1.9% and 3.5%, respectively.
But here's the intriguing part: some experts, like Wang Kai from Morningstar, believe this looming threat might be short-lived. Wang suggests that investors could use this opportunity to enter the Chinese stock market at more attractive prices. James Wang from UBS expects the market to avoid the lows of April 2025, citing increased investor interest, reduced uncertainty about global tariffs, and the significant rise in global equity markets since then.
Louisa Fok from Bank of Singapore's private banking arm, OCBC Bank, remains constructive in the medium term, citing earnings stabilization, improved return on equity, and the US Federal Reserve's rate cut cycle as benefits to HK and China's equity markets. Fok adds that the recent sharp rise in the HSI has pushed valuations to the higher end of the trading range, and better risk-reward accumulation opportunities may arise if valuations pull back.
Bank of Singapore reiterates a balanced approach, recommending quality yield stocks to cushion market volatility and selective growth stocks in investment themes focused on artificial intelligence, policy beneficiaries, and improved outlooks post-interim results. Value Partners Group, a global fund manager, is confident in the Hong Kong equity market's strong momentum, citing ample global liquidity and passive fund inflows. Dah Sing Bank, in its market research report, highlights the potential for further interest rate cuts in the US, continued progress in China's AI sector, and continued southbound capital inflows as supportive factors for the Hong Kong stock market.
However, the report also cautions that mixed corporate earnings performance and revised downward earnings forecasts for Hang Seng Index constituent stocks could limit the HSI's upward momentum, given its overall market valuation.
So, what's your take on this? Do you think the market will continue its upward trajectory, or are we in for a bumpy ride ahead? Share your thoughts in the comments below!
