Why did equity assets rebound despite the US non-farm payrolls exceeding expectations?

On the evening of April 3, the U.S. released its March Non-Farm Payrolls data, which came in well above market expectations. After the data was released, U.S. Treasury yields and the U.S. dollar rose; in theory, short-term pressure would weigh on technology growth-type assets. However, the Nasdaq opened lower and then closed higher that day, and on Monday it continued its rebound. Meanwhile, the stock markets in Japan and South Korea rose in sync on both Monday and Tuesday mornings. What logic could possibly be behind this counterintuitive trend?

Even more worth focusing on is this: since the market has already absorbed, at least temporarily, the pressure from rising Treasury yields and the stronger dollar, do A-share and Hong Kong-listed technology sectors also have a chance to make a recovery?

1. What exactly are Non-Farm Payrolls data, and why are they important?

Non-Farm Payrolls (NFP) data is the monthly employment report released by the U.S. Department of Labor. The three most important core indicators are the number of new non-farm jobs added, the unemployment rate, and the growth rate of average hourly earnings.

The importance of NFP data lies in its ability to influence the Federal Reserve’s monetary policy, which then affects global liquidity and asset prices.

Strong NFP data → stronger consumption → upward risks to inflation → higher expectations for rate hikes → a stronger dollar and higher Treasury yields → pressure on asset valuations; conversely, it boosts asset valuations.

That is to say, what everyone cares about is not only the NFP data itself, but whether it would cause the Federal Reserve to change its mind—such as whether to raise or cut rates.

2. Why did U.S. Non-Farm Payrolls come in above expectations, yet equities rebounded?

On the evening of April 3, the U.S. released March Non-Farm Payrolls data. At first glance, the figures looked very strong:

1. New non-farm employment surged far above expectations (190k, vs. 65k expected); 2) The unemployment rate fell to 4.3% (vs. 4.4% expected); 3) Average hourly wage growth showed some cooling.

After the data was released, Treasury yields and the U.S. dollar rose, which may put short-term pressure on technology growth-type assets.

But if we look through the surface to the essence, the March NFP data is not as strong as it appears:

1. Most of the new jobs added in March came from the education and healthcare industries (+91k), mainly due to the end of a strike in the healthcare sector. The information and finance industries continued to decline, reflecting the negative impact of AI on job replacement;

2. The reason the unemployment rate fell is not an improvement in employment, but a decline in the labor force participation rate (currently 61.9% vs. 62.5% in Nov. 2025). In other words, many people give up looking for jobs; they are no longer counted as “unemployed”;

3) Compared with the noise created by the NFP employment numbers, wage levels are still trending downward amid high inflation, indicating a cooling trend in the labor market.

Recent Non-Farm Payrolls data has swung sharply up and down, weakening the reference value of NFP data in a single month. But when viewed as a whole over the past four months, the average new jobs added each month were 47k/month (vs. 76k/month when the Fed restarted rate cuts in September 2025). It still reflects a relatively weak state of “low employment + low layoffs,” which is favorable for rate cuts:

Source: U.S. Bureau of Labor Statistics, as of April 2, 2026

And if we extend the time horizon further and look at the historical trend of NFP data, we can see that since 2023, the unemployment rate has been rising in a consistent trend, the number of new non-farm jobs has been declining in a consistent trend, the year-over-year growth rate of average hourly earnings has been slowing, and overall employment conditions have been weakening.

Therefore, if the non-farm employment data continues to remain relatively weak, the probability of Federal Reserve rate cuts would increase at the margin. Liquidity is also expected to remain easier, which would then provide an incremental boost to the valuations of the technology sectors in Hong Kong and A-shares.

Chart: Trend of new non-farm employment and the unemployment rate

Source: Wind, as of April 6, 2026

Chart: Trend of average hourly earnings in Non-Farm Payrolls

Source: Wind, as of April 6, 2026

4. Regarding rate cuts, there is a major disagreement between the market and the Federal Reserve—so which one should we follow?

In the near term, the interest-rate futures market believes the timing of the next rate cut will be pushed back further (as shown below, the probability of a rate cut in September 2027 is only just above 50%), while the March FOMC Summary of Economic Projections (the dot plot indicating the Fed’s rate path) suggests that there will be one rate cut each in 2026 and 2027.

Chart: Rate cut timing priced in by interest-rate futures after Sept. 2027

Source: FedWatch, as of April 2, 2026

Chart: March FOMC dot plot indicates one rate cut each in 2026 and 2027

Source: Federal Reserve, as of April 2, 2026

The main reason for the divergence between the two is the sharp rise in international oil prices. The market is concerned that on one hand, high oil prices push inflation higher; on the other hand, they suppress demand and drag down economic growth, thereby affecting the monetary policy path.

There is a clear “expectations gap” between the market and the Federal Reserve. Ultimately, whose view should matter more?

In fact, when it comes to rate cuts, both the Federal Reserve and market expectations are important references. But the decisive factor is still the economic data itself. However, because the Federal Reserve’s FOMC dot plot is the most direct official roadmap of policy, we can treat it as a benchmark scenario for future monetary policy. Then we can continuously track employment and inflation data to capture changes in the scenario.

Under the benchmark scenario, medium-term liquidity is expected to remain relatively loose. Currently, the March FOMC dot plot points to one rate cut in 2026, and an overwhelming majority of policymakers believe a rate hike is the non-benchmark scenario. In addition, on March 30, the Federal Reserve Chair publicly stated that “the current long-term inflation expectations are overall stable,” which to some extent alleviated market concerns about liquidity. Therefore, if inflation remains stable and the Non-Farm Payrolls employment data continues to soften moderately, there is still hope for rate cuts this year, thereby releasing liquidity.

5. In the short term, liquidity tightens; since the start of the year, Hong Kong and A-share technology have faced pressure—how should we look at what comes next?

Revisiting the situation, as representatives of technology in Hong Kong and A-shares, the Hang Seng Tech / STAR Market 50 index shows a fairly clear negative correlation with U.S. Treasury yields.

As a technology growth sector traded in the offshore market, the Hang Seng Tech Index’s valuation anchor is U.S. Treasury yields. Moreover, foreign investors account for a relatively high share in its holdings, making it highly sensitive to global liquidity.

As a representative of China’s hard-tech sector within A-shares, the STAR Market 50 reflects our own independent and controllable industrial foundations. But because it has the characteristics of “high valuation” and “high growth,” it is also affected by global liquidity—though since its pricing is anchored more to domestic policy and industrial trends, the impact it faces is usually weaker than that on Hang Seng Tech.

Since the start of the year, shocks such as “the nomination of Waller by the Fed Chair,” and “the situation in the Middle East fluctuating repeatedly,” have come in succession. In June 2026, the probability of Fed rate cuts dropped from above 80% at the start of the year to as low as 0% at one point. Liquidity can explain, to some extent, the relatively weak performance of Hang Seng Tech and STAR Market 50 in recent times.

Chart: Since the start of the year, the probability of a June Fed rate cut has kept falling

Source: FedWatch, Wind, as of April 2, 2026

But when the market is pessimistic, some people panic, while others see opportunities.

Compared with other sectors, the current Hang Seng Tech and STAR Market 50 are relatively more fully pricing in pessimistic expectations for medium-term liquidity. According to a note by CICC analysts, “The current futures market is pricing the situation very pessimistically. As long as the conflict does not continue into the second half of the year and the oil price does not stay above $100, the Fed can still cut rates.”

Note: The view cited from CICC’s “Has the market already fallen far enough?”

Therefore, if the Fed delivers rate cuts within this year and medium-term liquidity improves, Hang Seng Tech and STAR Market 50 may become some of the sectors that see valuation recovery first.

6. As a typical high-volatility asset, choosing the right investment approach for Hang Seng Tech / STAR Market 50 is crucial

To be honest, investors holding Hang Seng Tech / STAR Market 50 recently have been going through a tough stretch. But let’s stay calm and look: in history, has anything similar happened? And at the time, how could investors have done it better?

Actually, many investors are not lacking judgment. They believe AI is a long-term trend, but in actual investing, they often struggle to accurately catch the highs/lows. The problem often arises in the participation method itself, because for a high-volatility growth asset like Hang Seng Tech, it is very difficult to time each entry precisely.

Therefore, it’s worth taking a longer view: use disciplined systematic buying through fixed-interval investing, which diversifies cost over the time dimension and smooths volatility. When the market is at a low valuation but the direction is unclear, this approach can both avoid the anxiety of “missing the opportunity” and reduce the risk of “chasing high.”

Using history as a reference, we simulated systematic investing with February 2022 as the sample. At that time, the external environment had a relatively high similarity to today: it was also in a state of “geopolitical conflict + a surge in oil prices,” and the Hang Seng Tech / STAR Market 50 index was under continued pressure. Let’s see what kind of effect systematic investing could achieve under the long-term holding mindset.

Systematic buying of Hang Seng Tech began on February 24, 2022: the Hang Seng Tech closing price at entry was at 5,069 points. The systematic investing return first turned positive on March 17, 2022, when the index was down by about 10% from the beginning of that period. When the index returned near the initial level again on June 27, 2022, the systematic investing position had already generated a profit of more than 15%.

Chart: Systematic investing in the Hang Seng Tech index starting in 2022

Chart: Systematic investing in the STAR Market 50 index starting in 2022

Source: Wind; the calculation period is 2022/2/24–2026/4/2. The systematic investing benchmark is the Hang Seng Tech Index (HSTECH.HI) and the STAR Market 50 Index (000688.SH). The systematic investing method is daily fixed-amount purchases from the start date of the date range, excluding subscription/redemption fees. The dividend distribution reinvestment option is selected (dividend reinvestment). Cumulative return rate = (ending cumulative market value − cumulative invested principal) / cumulative invested principal * 100%, where cumulative invested principal = daily fixed investment amount × actual number of systematic investing days, and the ending cumulative market value at the end of the systematic investing period = Σ(daily systematic investing units × daily index level), with the units calculated as (daily investment amount ÷ index point level on that day) and then multiplied by the index point level at the end of the measurement period. Backtest data is for illustration and simulation only and does not serve as trading guidance or a guarantee of returns.

7. Summary

Overall, the medium-term weakness in the Non-Farm Payrolls data supports expectations of Fed rate cuts. If inflation remains relatively stable, medium-term liquidity has the potential to loosen at the margin. Under this basis, the Hang Seng Tech / STAR Market 50 index may have priced in pessimistic expectations relatively more, and it has valuation recovery potential. For long-term investors who are optimistic about the prospects of the technology sectors in Hong Kong and A-shares, diversifying cost and smoothing volatility through systematic investing is a configuration option worth paying attention to.

Hang Seng Tech ETF by E Fund (513010; fund of funds: Class A 013308 / Class C 013309), as an allocation tool that tracks the index closely, has advantages in liquidity, fees, and transparency.

E Fund’s STAR Market 50 ETF (588080; fund of funds: Class A 011608 / Class C 011609) closely tracks the SSE STAR Market 50 constituents index. It brings together leading companies across the entire AI industrial chain, such as AI chips, semiconductor equipment, and materials, making it an excellent choice for capturing internal structural opportunities within AI.