The Hong Kong stock market's three major indices experienced a sharp, last-minute plunge on the final trading day of June.
At the close, the Hang Seng Index (HSI) was 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) fell by 0.96% and 0.72%, respectively, reflecting subdued market sentiment for the day.
Despite this single-day dip, the broader picture for June was positive, capping off a remarkably strong first half of the year. Key highlights included the meteoric rise of new consumption and stablecoin-related concepts, alongside standout performances from rare earth and gold stocks.
For the month of June, the HSI, HSCEI, and HSTECH posted cumulative gains of 3.36%, 2.92%, and 2.56%, respectively. Their impressive half-year performances saw them surge by 20%, 19.05%, and 18.68% cumulatively.
Market Performance Overview
The day's trading saw a mixed bag among major tech stocks. The large financial stocks that had previously driven the market upward mostly continued their corrective trend from the previous Friday. Sectors including gold stocks, automotive stocks, mainland property developers, oil stocks, and heavy machinery manufacturers broadly moved lower. In contrast, the new consumption sector saw a collective upswing, defense stocks remained strong throughout the session, and consumer electronics concepts along with biopharmaceutical stocks generally gained strength.
Sector-Specific Analysis
Large-Cap Technology Stocks: Performance was mixed. Xiaomi and NetEase gained over 1%, while Meituan fell more than 3%, Alibaba dropped over 2%, and Tencent and JD.com saw minor losses.
Cryptocurrency and Stablecoin Concepts: These stocks were exceptionally hot. New Huo Technology Holdings surged over 31%, Guotai Junan International gained more than 13%, and OKG Technology Holdings rose over 12%. This rally was fueled by significant regulatory developments. The US Senate passed legislation concerning stablecoins this month, although the bill has yet to clear the House of Representatives. In a parallel move, Hong Kong's legislative body passed its own stablecoin bill in May, and South Korean President Lee Jae-myung has pledged to allow domestic companies to issue such tokens.
Contract Research Organization (CRO) Stocks: This segment led the gains. Wuxi AppTec surged over 12%, Tigermed Consulting rose more than 7%, and Asymchem Laboratories climbed over 5%. The catalyst was a notice issued in June by China's National Medical Products Administration (NMPA), proposing to shorten the review and approval time for all innovative drug clinical trial applications from 60 days to just 30 days. HSBC released a research note stating that this acceleration, driven by policy support, is a significant boon for CROs. Demand for innovative drug clinical trials is shifting to China, which is demonstrating higher efficiency and effectiveness in its clinical trial industry. China Merchants Securities added that the CXO sector, a critical link in the innovative drug chain, has seen its competitiveness highlighted even after a low point in investment and financing and the bio-secure incident.
Aerospace, Defense, and Military Stocks: This sector was active. Continental Aerospace Technology Holdings gained over 6%, AVIC Aircraft rose nearly 4%, with China CSSC Holdings and Aerospace Hi-Tech Holding also posting gains. Analysts at Shenwan Hongyuan believe that as global geopolitical changes intensify and the demand for international military trade expands, coupled with market attention from potential military parades, the sector is poised for a re-rating. These events are not just emotional catalysts but also serve to showcase new equipment that aligns with future national development plans, potentially leading to a dual boost in fundamentals and sector valuation.
Gold and Precious Metal Stocks: This sector faced downward pressure. Dragon Mining fell over 3%, while Zijin Mining Group and Shandong Gold Mining dropped more than 2%. The spot gold price fell during the early session, losing the $2,260 per ounce level. CITIC Construction Bank expressed the view that the core driver of the significant gold price rise in the first four months was uncertainty surrounding potential US policies. With an expectation of trade easing and a recovery narrative for the second half of the year, the short-term bullish case for gold is less obvious. A rise in global risk appetite, potentially from a stronger worldwide equity market or de-escalation of conflicts, could trigger a significant correction from historically high price levels.
Mainland Bank Stocks: These saw a pullback. Bank of Tianjin plummeted over 43%, while China Zheshang Bank, China CITIC Bank, and Bank of China fell around 2%. This correction is attributed to substantial gains year-to-date (e.g., over 20% for some of the big four banks), creating a technical need for adjustment. Furthermore, the Loan Prime Rate (LPR) remained unchanged in June, cooling market expectations for further interest rate cuts and temporarily limiting the logic for improved net interest margins. Some analysis suggests this is a normal consolidation after a rapid rise. Short-term performance will depend on capital rotation and policy pace, but the long-term appeal of low valuations and high dividends makes them a配置 choice in volatile markets.
Automotive Stocks: This was among the worst-performing sectors. Li Auto fell over 3%, Leapmotor and Beijing Automotive dropped more than 2%, while XPeng, Great Wall Motor, and BYD Company all declined over 1%. Soochow Securities, in its H2 2025 automotive industry investment strategy report, suggested that the industry stands at a new crossroads. The industry红利 from electrification is nearing its end, while the红利 from intelligent driving is still in its infancy. Sub-sectors like commercial vehicles and two-wheelers may become good supplementary investment areas. The report advises two strategies: 1)寻找穿越周期的α品种 (seeking alpha varieties that can traverse cycles), and 2) firmly embracing the next industrial trend (intelligence + robotics).
Capital Flows and Future Outlook
Southbound capital flows through the Stock Connect program showed robust interest, with a net inflow of HKD 5.22 billion for the day. This was split between HK$2.393 billion net bought via the Shanghai Connect and HK$2.826 billion via the Shenzhen Connect.
Looking ahead, analysts at Standard Chartered Wealth Management caution that the Hong Kong market faces several downside risks. These include unresolved geopolitical tensions in the Middle East, alongside heightened concerns over US tariffs, inflation, and issues related to government debt or deficits.
For the coming 12 months, their forecasts include a Hang Seng Index target of 25,500 points. They also project targets of 6,410 points for the S&P 500, 23,650 points for the Nasdaq 100, and 5,550 points for the Euro STOXX 50.
Frequently Asked Questions
What drove the strong performance of the Hong Kong stock market in the first half of the year?
The market's strong performance was fueled by a combination of factors, including a surge in new consumption trends, rising interest in stablecoin and crypto-related concepts, and robust performances from sectors like rare earths and gold. Positive regulatory developments and a general shift in global investment sentiment also played significant roles.
Why did stablecoin-related stocks perform so well?
Stablecoin stocks rallied due to significant regulatory progress in key global financial markets. The US Senate passed relevant legislation, Hong Kong established its own regulatory framework, and South Korea's leadership expressed support for domestic token issuance, creating a favorable environment for companies in this space.
Is the pullback in bank stocks a cause for concern?
The pullback appears to be a technical correction following substantial gains earlier in the year, rather than a shift in fundamental value. While short-term performance may be influenced by policy expectations, their long-term investment appeal, characterized by low valuations and high dividends, often remains intact during market fluctuations. For investors seeking to understand market cycles, explore more strategies on navigating such volatility.
What is the outlook for the defense and aerospace sector?
The outlook is positive, driven by increasing global geopolitical tensions and expanding international demand for military trade. Domestic developments, such as potential new equipment showcases aligning with national plans, are expected to provide both emotional and fundamental support for the sector's valuation.
How significant is the policy change for China's pharmaceutical CRO industry?
The policy change to halve the approval time for clinical trials is highly significant. It dramatically improves efficiency, making China a more attractive destination for global innovative drug development. This is a major structural tailwind for domestic CRO companies, enhancing their global competitiveness and growth prospects.
Where are automotive investors focusing now?
With the electrification boom maturing, investor focus is shifting towards companies that can demonstrate resilience across market cycles (alpha) and those positioned to lead the next wave of automotive innovation, primarily focused on smart, connected vehicles and robotic technologies.