As the fourth quarter of 2024 draws to a close, investors in both Hong Kong and the US are gearing up for the eagerly anticipated earnings season. This critical period, marked by the release of quarterly financial reports by publicly traded companies, has the potential to significantly impact stock prices and investor sentiment. Let's delve into the similarities and differences between the Hong Kong and US earnings seasons, and explore how investors can navigate this volatile yet promising time.



Market Volatility and Investor Sentiment

Both Hong Kong and US stock markets experience significant volatility during earnings seasons, with substantial fluctuations in stock prices and shifts in investor sentiment. In Hong Kong, the Hang Seng Index has witnessed notable declines, such as the one in early December 2024, due to concerns about inflation and uncertainty surrounding the Fed's monetary policy actions. Similarly, in the US, the Dow Jones Industrial Average (DJIA) set its longest losing streak since 1974 in December 2024, driven by concerns about potential tariffs, inflation, and geopolitical tensions under the Trump administration.

Investor sentiment in both markets is heavily influenced by earnings reports, with positive surprises often leading to increased buying activity and higher stock prices. Conversely, negative surprises can create fear and uncertainty, prompting selling activity and lower stock prices. This psychological impact underscores the importance of earnings reports in shaping market sentiment and driving investment decisions.



Sector Performance

During earnings seasons, specific sectors tend to experience the most significant stock price movements in both Hong Kong and the US. In Hong Kong, the technology and financial sectors, which are heavily represented in the Hang Seng Index, tend to see substantial volatility. For instance, in the fourth quarter of 2024, the Hang Seng Index experienced a significant rally, with technology stocks leading the way, as reported by the South China Morning Post (SCMP) on January 10, 2025.

In the US, the tech-heavy NASDAQ 100 index has been a significant driver of market performance during earnings seasons. The "Magnificent 7" stocks, which include tech giants like Apple and Microsoft, have been a major contributor to the rising earnings expectations for the NASDAQ 100 index throughout 2024. Additionally, the financial sector in the US has seen significant stock price movements during earnings seasons, with banks like JPMorgan Chase playing a crucial role in shaping market expectations and influencing investor sentiment, as highlighted in the Hong Kong Institute of Economics and Business Strategy (HIEBS) report from January 10, 2025.



Analyst Forecasts and Earnings Surprises

Analyst forecasts and earnings surprises significantly influence stock performance in both Hong Kong and US markets during earnings seasons. In the US, the S&P 500 index has a historical average of beating analyst estimates by 3-4% (FactSet). Similarly, in Hong Kong, analysts' estimates for GDP growth were around 3.5% in the 2025 Q1 Hong Kong Macroeconomic Forecast Report (HIEBS, HKU).

Earnings surprises, either positive or negative, can significantly impact stock performance. In the US, companies that beat analyst estimates by a larger margin tend to see their stock prices rise more than those with smaller surprises (FactSet). In Hong Kong, companies that exceeded GDP growth estimates saw their stocks perform better than those that fell short.

Navigating Earnings Season

To navigate the volatility and uncertainty of earnings seasons, investors should focus on thorough research and analysis, prudent diversification, and maintaining a long-term perspective. By staying informed about historical data, analysts' reports, and industry dynamics, investors can make more informed decisions during this critical period. Additionally, diversifying investments across a well-balanced portfolio can help cushion against undue exposure to specific events, while maintaining a long-term vision allows investors to focus on a company's intrinsic value and its strategic direction.

In conclusion, Hong Kong and US stock earnings seasons share many similarities in terms of market volatility, investor sentiment, and sector performance. However, each market has its unique characteristics and challenges. By understanding the dynamics at play and employing strategic investment strategies, investors can capitalize on the opportunities presented by earnings seasons and build long-term wealth.