Sou Hu Cai Jing·2025-10-30 09:59Core Viewpoint - The Hong Kong stock market has stabilized after recent uncertainties, with positive outcomes from the US-China meetings, alleviating concerns over tariff impacts. The upcoming earnings season for internet stocks is expected to drive performance, particularly in the fourth quarter, with a focus on technology stocks and the potential for a rebound in the Hang Seng Tech Index [1]. Group 1: Market Conditions - The Hong Kong stock market has been in a sideways trading phase for the past two weeks, with no significant volatility [1]. - The easing of uncertainties is expected to create a favorable macro environment for the market, leading to a potential recovery process [22]. Group 2: Investment Opportunities - The upcoming earnings season for internet stocks is anticipated to provide more certainty regarding performance, making it a key focus for investors [1]. - The Hang Seng Tech ETF (513010) is highlighted as a potential investment opportunity as the market stabilizes [1][22]. Group 3: AI and Internet Stocks - According to BofA, Chinese internet stocks present compelling opportunities in the AI sector, driven by efficiency, practical applications, and ecosystem integration [3]. - The closed-loop ecosystems of companies like Tencent and Alibaba allow for direct AI application, enhancing their competitive edge [3]. - Chinese internet companies are actively reducing token costs to facilitate AI applications [4]. Group 4: Valuation Insights - BofA notes that the current valuation of the industry is low compared to historical averages, with a forward P/E ratio of 17 times, significantly below the 10-year average of 22 times [7]. - Tencent and Alibaba's valuations remain lower than their US counterparts, with Tencent's expected P/E for 2026 at 19 times, below its 10-year average of 23 times [12]. Group 5: Regulatory Environment - BofA emphasizes that tail risks in the regulatory environment are decreasing, with a shift towards more support for the private sector [11]. - The return of key founders and the alignment of technological self-sufficiency with corporate growth confidence are seen as positive indicators [11]. Group 6: Foreign Investment Trends - As of September, active foreign investment in Chinese stocks has increased, with allocations rising from 6.7% in August to 7.2% [22]. - The "binary" divergence in investment strategies is intensifying, with Asian funds significantly over-allocating while emerging market funds are under-allocating [22].