Hong Kong stocks snap 5-day gain ahead of latest China-US trade talks

The run-up that drove Hong Kong stocks to the highest level in three and a half years took a pause on Friday before a new round of trade talks between China and the US over the weekend and the start of the earnings season.

The Hang Seng Index fell 1.1 per cent to 25,383.07 at the noon break, halting a five-day, 4.8 per cent gain that sent it to the highest level since November 2021. The Hang Seng Tech Index dropped 1.7 per cent. On the mainland, the CSI 300 Index slid 0.6 per cent, and the Shanghai Composite Index retreated 0.3 per cent.

Tech stocks led the declines, with Kuaishou Technology and Meituan dropping at least 2 per cent. Macau casino operator Sands China fell before its interim earnings release later in the day.

Investors need more conviction from the third round of China-US tariff talks to extend the momentum that carried the Hang Seng Index to an almost 30 per cent gain this year. It is widely expected that the two nations will extend a 90-day tentative deal reached in April. Investors will also be on the lookout for cues from the strength of corporate results, as Sands kicks off the earnings season.

“The valuations of Hong Kong stocks have expanded significantly and room for further expansion may be limited,” said Melody Lai, an analyst at SPDB International in Hong Kong. “Going forward, the impact of the tariff may be reflected in fundamentals. We need to spot these stocks with less exposure to tariffs.”

The Hang Seng Index rose by more than 2 per cent this week as fears faded that the US tariff approach would derail global growth and stoke inflation. The US struck a deal with Japan, imposing a lower-than-expected 15 per cent rate on imports, and is reportedly close to reaching an agreement with the European Union that would not trigger retaliation from the bloc.