Last week saw the A-share market advance with volatility, as major broad-based indices posted gains.
In contrast, the three primary Hong Kong stock indices all recorded declines over the same period.
In the near term, market focus is expected to shift towards the verification of interim earnings reports, with pricing logic returning to fundamental drivers. The pace of sector rotation may accelerate, highlighting the importance of identifying sub-sectors with solid underlying fundamentals.
Equity Market Performance and Outlook (2026.6.15-2026.6.19)
The A-share market trended higher with fluctuations last week, with major indices closing in positive territory.
From a style perspective, small-cap stocks outperformed, with the CSI 1000 Index rising 6.93% compared to a 3.44% gain for the CSI 300 Index.
The five major style indices showed divergent performance, with the growth style surging 11.02%, while financial, stable, and consumer styles recorded losses.
Market trading activity increased. The average daily turnover for the week was 3.1457 trillion yuan, up 356.642 billion yuan from the previous week.
The average daily turnover rate was 1.9328%, a rise of 0.04 percentage points week-over-week.
The provisional U.S.-Iran agreement has entered the implementation phase, with traffic through the Strait of Hormuz gradually resuming.
The U.S. has lifted its maritime blockade on vessels entering and leaving Iranian ports and coastal areas, boosting expectations for a recovery in Iranian crude oil exports.
This has led to a rapid decline in the oil risk premium that was previously elevated by geopolitical conflict, shipping disruptions, and supply interruptions.
However, the agreement remains within a 60-day negotiation window, with issues such as nuclear concerns, sanctions relief, security guarantees, implementation of the Israel-Lebanon ceasefire, and rules for Hormuz transit not yet fully resolved.
For the full week, the Shanghai Composite Index rose 1.46%, the Shenzhen Component Index gained 7.13%, the ChiNext Index jumped 11.02%, the CSI 300 Index increased 3.44%, the STAR 50 Index surged 14.93%, and the BSE 50 Index advanced 1.82%.
By sector, electronics, communications, and building materials led the gains, rising 17.63%, 14.86%, and 11.52% respectively.
Coal, banking, and food & beverage were among the worst performers, declining 10.42%, 6.14%, and 5.01% respectively.
All three major Hong Kong stock indices declined last week.
The average daily turnover on the Hong Kong Exchange was HK$290.665 billion, a decrease of HK$29.107 billion from the previous week.
Southbound capital recorded a cumulative net outflow of HK$4.441 billion for the week, a reduction in net inflow of HK$8.692 billion compared to the prior week.
Following his first FOMC meeting, the Federal Reserve maintained the target range for the federal funds rate at 3.50%-3.75%, but the statement removed forward guidance and language suggesting an easing bias, with the dot plot turning notably more hawkish.
He emphasized the priority of price stability and downplayed the guidance significance of the dot plot, prompting markets to shift from previous rate-cut expectations to repricing policy discipline and the risk of rate hikes.
For the week, the Hang Seng Index fell 3.21%, the Hang Seng Tech Index dropped 2.14%, and the Hang Seng China Enterprises Index declined 4.76%.
By sector, two industries rose while nine fell. Information technology gained 7.00%, industrials rose 1.31%, while energy plunged 8.01%, real estate fell 6.50%, consumer staples dropped 5.92%, and utilities declined 4.23%.
Currently, regarding the external environment, although the June Fed meeting's dot plot was hawkish, leading markets to reprice the risk of rate hikes within the year, the temporary easing of U.S.-Iran relations and their memorandum of understanding to end conflict has provided a brief respite from global geopolitical pressure.
However, with talks temporarily canceled and the Strait of Hormuz closed again, geopolitical uncertainty is resurfacing.
The impact of liquidity volatility under heightened rate hike expectations persists, and subsequent attention is needed on the potential recurrence of external risks.
On the domestic policy front, the Lujiazui Forum clarified the policy direction of capital markets serving the real economy, with a focus on supporting "hard technology."
The policy focus is tilting towards hard tech, long-term capital, and institutional openness, benefiting the hard tech theme.
Reforms on the product and capital fronts are also improving market liquidity and valuation systems, laying a solid foundation for the market's long-term healthy operation.
In the short term, market focus is expected to shift towards the verification of interim earnings reports, with pricing logic returning to fundamental drivers.
The pace of sector rotation may accelerate, highlighting the importance of identifying sub-sectors with solid underlying fundamentals.
Key Events and Economic Data
Domestic
China's May new aggregate financing reached 2.03 trillion yuan, with new RMB loans at 520 billion yuan. M2 money supply grew 8.6% year-on-year.
May financial data showed a widening divergence in credit structure: household loans continued to contract, with a cumulative decrease of 631.4 billion yuan in the first five months; corporate medium- and long-term loans remained stable.
The trend of deposit terming persisted, with the M2-M1 spread at 3.1%, narrowing 0.5 percentage points from the previous reading.
The National Development and Reform Commission and other departments issued a notice on launching a three-year action plan for energy conservation, carbon reduction, and technological transformation in key industries.
The plan targets sectors including steel, electrolytic aluminum, cement, flat glass, oil refining, ethylene, synthetic ammonia, methanol, and coal-fired power.
In May, retail sales fell 0.6% year-on-year (consensus: +0.1%, prior: +0.2%); fixed asset investment declined 4.1% year-to-date (consensus: -1.7%, prior: +1.6%); real estate development investment dropped 16.2% year-to-date (consensus: -13.7%, prior: -14.6%); sales area for newly built commercial housing fell 10.8% year-to-date (prior: -10.2%); industrial value-added output grew 4.5% year-on-year (consensus: 4.4%, prior: 4.1%).
In May 2026, among 70 large and medium-sized cities, new commercial residential sales prices in first-tier cities rose month-on-month, while second- and third-tier cities saw monthly declines. Year-on-year declines narrowed across all city tiers.
At the Lujiazui Forum, PBOC Governor Pan Gongsheng announced several significant measures: authorizing six major banks to conduct offshore RMB foreign exchange trading pilot programs in the Shanghai Free Trade Zone; creating an overseas central bank repo facility allowing foreign official institutions to obtain RMB liquidity using Chinese government bonds as collateral; researching the establishment of a macroprudential tool for non-bank liquidity support to address extreme systemic stress in the bond market; improving the short-term interest rate control mechanism by narrowing the interest rate corridor from 70 basis points to 50 basis points.
At the same forum, it was stated that the scope of the STAR Market's fifth set of listing criteria will be expanded to include the artificial intelligence large model industry, and eligible Hong Kong-listed companies will be supported in listing domestically.
He also announced that guidelines for the standardized development of AI in capital markets will be released in due course, and joint research with the People's Bank of China will be conducted to advance the pilot for RMB foreign exchange futures.
Overseas
On June 18, the Federal Reserve released its June meeting statement, maintaining the target range for the federal funds rate at 3.50-3.75% and continuing reserve management purchases, while downplaying forward guidance.
The statement noted that economic activity continues to expand at a solid pace, with the unemployment rate little changed; inflation remains elevated relative to the 2% target, partly reflecting supply shocks.
A new reference to "strong productivity growth and capital spending" was added. The meeting significantly revised up inflation forecasts and slightly lowered the 2026 GDP growth forecast.
The 2026 PCE and core PCE forecasts jumped to 3.6% and 3.3% from 2.7% respectively. The 2026 GDP growth expectation was trimmed by 0.2 percentage points, indicating the FOMC views the shock as "transitory."
The June dot plot shifted higher overall, but guidance was not provided, significantly reducing its referential value. For the current year, nine members see at least one rate hike, while eight support no change and one supports a 25-basis-point cut.
However, the dot plot guidance conflicts with the Summary of Economic Projections, rendering its guidance effect potentially negative, and it may gradually fade from the communication framework.
During the press conference, he outlined subsequent reform plans: 1) He emphasized changes to the meeting statement and reform resolve, stating the current SEP format is unsuitable for policymaking. 2) He has formed five working groups to comprehensively review communication, the balance sheet, data, AI & employment, and the inflation framework, paving the way for potential changes.
He displayed an inflation "hawkish" stance: 1) He stated, "Inflation is ultimately a choice for monetary policy. The Fed has the ability and resolve to achieve the 2% target. This commitment is firm, consistent, and unequivocal." 2) The core logic for abandoning forward guidance is that financial markets are most efficient when reacting to real economic data.
The Bank of Japan announced a 25-basis-point rate hike, raising the policy rate from 0.75% to 1.0%, in line with expectations and marking the highest level in 31 years.
The BOJ stated it will suspend the tapering of bond purchases from April 2027, maintaining monthly Japanese government bond purchases at around 2 trillion yen.
Former U.S. President Trump threatened a 100% tariff on French wine unless France cancels its digital tax, to which French President Macron refused to compromise.
Japan's May exports grew 17% year-on-year, the fastest pace since November 2022, exceeding the Reuters poll consensus of 16.2% and accelerating from April's 14.8% increase.
Semiconductor exports, driven by booming AI demand, surged 61.2%, becoming the core engine for this round of export growth.
He stated the Strait of Hormuz would fully reopen on Friday, the U.S. might soon reinstate sanctions on Russian oil, and Iran said the agreement requires Israel to withdraw troops from Lebanon.
U.S. media exposed the full 14-point draft U.S.-Iran memorandum of understanding. The draft calls for an end to hostilities on all fronts, including in Lebanon, with final agreement negotiations within 60 days of signing.
The U.S. commits to immediately lifting the maritime blockade and providing exemptions for Iranian crude and petrochemical exports upon signing, with a timeline for lifting sanctions on Iran to be determined in the final agreement, and a mechanism for implementing at least $300 billion in Iranian reconstruction funds to be established in the final agreement.
The scale and timeline for releasing Iran's frozen funds were not specified. Issues like uranium enrichment are left for the final agreement. Iran will restore commercial shipping traffic in the Strait of Hormuz to pre-war levels within 30 days of signing and reaffirms it will never develop nuclear weapons.
Key Data and Meetings to Watch This Week
June 22: China 1-year and 5-year Loan Prime Rates (LPR); Eurozone June Consumer Confidence Index.
June 24: China June Medium-term Lending Facility (MLF) operation; U.S. Q1 Current Account Balance.
June 25: U.S. Q1 GDP, PCE Price Index, Core PCE Price Index, Personal Consumption Expenditures.
June 26: China Q1 Current Account Balance, May Services Trade Balance; U.S. June University of Michigan 1-year and 5-year Inflation Expectations.
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