Hong Kong’s equity market edged down less than 1 percent in the first trading day of June, reflecting the global financial market’s concerns that trade tensions between China and the United States may flare up again.

The city’s equity market benchmark index, the Hang Seng Index, slipped 0.57 percent to close at 23,157 points in Monday’s trading, with a market turnover of HK$145.2 billion ($18.5 billion). The Hang Seng China Enterprises Index — a barometer of mainland companies — decreased 0.86 percent to finish at 8,359 points. The city’s technology stock gauge, the Hang Seng TECH Index, edged down 0.7 percent to close at 5,134 points.

The benchmark index tumbled more than 620 points before closing 511 points lower in the morning session. The index gradually recovered its losses in the afternoon trading session and ended 131 points lower than on the previous trading day.

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“Although the China-US trade war has been temporarily suspended, the threat of US tariffs has not yet completely been eliminated over (such a) short period of time. Future negotiations may cause market fluctuations again and the market may focus on the effectiveness of the mainland's economic stimulus measures,” a research report by the economic research and investment strategy department of Dah Sing Bank stated.

“We maintain our neutral view on the raw materials sector. The threat of the US tariff policy, and the slowdown in mainland industrial growth may affect the demand for raw materials, limiting the performance of raw materials stocks. On the other hand, gold mining stocks continue to benefit from the rise in gold prices,” the bank said, adding the HSI should be supported at around the 20,800-point level.

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“We expect the market to remain range-bounded unless there is significant progress made in the trade talks with the US. The Hong Kong equity market on the other hand should benefit from the sharp drop in HIBOR (Hong Kong Interbank Offered Rate) due to the strong Hong Kong dollar, because most of the sectors in Hong Kong are interest-rate sensitive, particularly the local property developers,” said Kelly Chung, multi asset chief investment officer at Value Partners.

James Wang, head of China Strategy at UBS Investment Bank Research, said that as southbound inflows snatching Hong Kong shares are bigger than northbound inflows chasing mainland equities, this will likely drive the performance of Hong Kong’s H-shares over the mainland’s A-shares year-to-date.

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The HSI hit a three-year high in March and then retreated sharply in early April as China-US trade tensions escalated abruptly and volatility in the global financial markets increased. The index resumed its upward trend in May and has risen 16.1 percent in the first five months of 2025.