The Hong Kong stock market continued its decline, with major indices falling collectively today. The Hang Seng Index dropped over 2% at one point, while the Hang Seng Tech Index fell more than 3%. The metals and mining sector suffered a significant sell-off, whereas the innovative biopharmaceutical sector bucked the trend with widespread gains. At market close, the Hang Seng Index was down 1.82% at 23,336.28 points, with a total daily turnover of HK$334.36 billion. The Hang Seng Tech Index closed 3.3% lower at 4,399.22 points. Among leading Hong Kong-listed ETFs by size, the Tracker Fund (02800) fell 1.9% to HK$23.70. The CSOP 2x Long S. Korea Futures ETF (07709) plunged 23.37% to HK$143.80. The CSOP Hang Seng Tech Index ETF (03033) dropped 3.36% to HK$4.314.
Sector Performance Overview
Metals and Mining Sector Tumbles
Signals from the new Federal Reserve Chair and heightened rate hike expectations, coupled with a reduction in geopolitical risk premium, led to a sharp decline in the metals and mining sector. Gold mining and base metals ETFs saw significant losses. At the close, the Tianhong Nonferrous Metals ETF (159880) fell 8.77% to 1.987 yuan. The Yongying Gold Mining ETF (517520) dropped 8.51% to 1.71 yuan. The Southern Nonferrous Metals ETF (512400) declined 8.31% to 1.976 yuan.
The latest FOMC meeting kept interest rates unchanged, but the new Fed Chair's debut signaled a hawkish stance. The updated dot plot projects a median rate of 3.8% for 2026, revised up by 40 basis points from March, implying one more rate hike this year and significantly strengthening expectations for further tightening. Additionally, expectations for the resumption of operations at the Cobre Panama copper mine have increased, with overall compliance reportedly reaching 88%, making a restart highly probable, which poses a medium-term headwind for copper prices. The reduction in Middle East geopolitical risk premium has led to a rapid withdrawal of safe-haven capital that had previously flowed in due to conflict, putting pressure on prices for assets like London gold and copper.
According to Goldman Sachs calculations, if the Fed proceeds with rate hikes, demand for gold as a macro hedge could continue to shrink. In an extreme scenario, the year-end target price could fall to $4,400 per ounce. Goldman Sachs analysts stated that the downward revision to their gold price target stems primarily from their economists pushing back the expected timing of Fed rate cuts to June and December 2027, leading to a significant downward revision in expected inflows for gold ETFs. Goldman had previously expected the Fed to begin cutting rates in December 2026 and March 2027. Following Goldman's substantial cut to its gold price target last week, Deutsche Bank, in its latest research report, slashed its gold price forecast by as much as 32%. This major adjustment not only marks a significant cooling of Wall Street's bullish sentiment towards gold but also reflects a dramatic shift in macro policy logic under the Fed's new leadership.
Innovative Biopharma Sector Rises Against the Trend
The issuance of the "Number Nine Document" on medical insurance, which establishes differentiated pricing for high-value innovative drugs, led to broad gains in the innovative biopharmaceutical sector, with related ETFs among the top gainers. At the close, the Harvest SSE STAR Market Biotech ETF (588700) rose 2.11% to 0.92 yuan. The E Fund Innovative Biopharma ETF (516080) gained 1.53% to 0.598 yuan. The GF Innovative Biopharma ETF (515120) increased 1.44% to 0.563 yuan.
The recent release of the State Council's "Several Opinions on Improving the Drug Price Formation Mechanism" is a milestone event for the innovative drug sector. For the first time, the document explicitly calls for differentiated initial pricing for high-value innovative drugs, allowing prices that match high investment and high risk, and introduces commercial health insurance as a new payer. This fundamentally improves the future profit expectations for innovative drugs. Zhongtai Securities noted that, in contrast to the A-share and H-share healthcare sectors, the SPDR S&P Biotech ETF (XBI) rose against the trend amid intensified capital flows around the Fed's June meeting. Compared to Hong Kong's 18A and A-share innovative drug companies, which largely depend on domestic hospital sales and overseas BD licensing and face Sino-US policy concerns, XBI's constituents are primarily US-listed biotech firms. Most have commercialization pipelines within the US, active M&A, and operate within a complete US Medicare payment system, leading to a divergence in valuation logic. Under this logic, Zhongtai Securities believes structural opportunities exist in innovative drug companies with commercialized products, cash flow, and significant clinical data, as well as leading companies with low valuations and strong support for earnings realization.
Institutional Perspectives
Guoyuan Securities' view is that, in the short term, the core constraint facing the Hong Kong market remains liquidity. The Fed's hawkish signals limit the room for improvement in the valuation denominator for Hong Kong stocks, while the Bank of Japan's rate hikes may cause periodic disturbances for Asian equity assets. Therefore, until external interest rates and capital flows stabilize completely, the index level may continue to consolidate and digest. In terms of allocation, they judge that structural differentiation within the Hong Kong market will remain the main theme. Capital will focus more on companies' ability to deliver earnings and their medium-to-long-term growth potential. For high-growth sectors like AI infrastructure, they suggest maintaining exposure but advise caution regarding short-term trading congestion and amplified volatility risks.
Comments