2025-07-11 01:13Investment Rating - The report indicates a positive outlook for the Hong Kong stock market, highlighting significant liquidity improvements and potential for valuation recovery, particularly in the small and mid-cap sectors [1][5][18]. Core Insights - The Hong Kong stock market has seen a notable increase in liquidity, primarily due to the rising proportion of new economy companies and increased participation from southbound funds and retail investors, which now account for approximately 40% of the market [1][3]. - The report anticipates that the Hong Kong Stock Exchange (HKEX) and brokerage sectors will benefit from high market activity and robust earnings support, with IPO financing expected to reach HKD 107 billion in the first half of 2025, a sevenfold increase year-on-year [1][9]. - The potential return of Chinese concept stocks to the Hong Kong market could significantly enhance trading volume and total market capitalization, with estimates suggesting an increase of 17% to 20% [12][18]. Summary by Sections Market Performance - The Hong Kong stock market is expected to remain active in the second half of 2025, with an increase in the number of listings and trading volume, particularly in the fourth quarter [2][9]. - The market's appeal for new economy assets has been bolstered by reforms at the HKEX and geopolitical factors [2][18]. Liquidity Improvement - The improvement in liquidity is attributed to both asset and funding sides, with a notable increase in the proportion of new economy companies enhancing tradability [3][5]. - The report emphasizes that improved liquidity has led to a revaluation of companies, particularly benefiting small and mid-cap stocks [5][18]. Impact of New Economy Companies - New economy companies have significantly influenced the market, with their market capitalization increasing from 27% in 2015 to over 51% by the end of 2024, and their trading volume now exceeding 70% [16][17]. - These companies are expected to drive higher turnover rates and valuations compared to traditional sectors [17]. Future Growth Potential - The report outlines that the future growth of the Hong Kong stock market will be supported by the influx of new assets and the revaluation of existing companies, driven by domestic enterprises seeking overseas financing and foreign companies returning to avoid geopolitical risks [18][19]. - The HKEX is projected to see substantial profit growth, with estimates suggesting a 31% year-on-year increase in Q2 earnings, reaching HKD 15.4 billion for the year [4][22]. Brokerage Sector Outlook - Key Chinese brokerages such as CITIC Securities, Huatai Securities, and Guotai Junan are expected to benefit significantly from the development of the Hong Kong market due to their strong overseas revenue and competitive edge [4][25]. - The overall outlook for the Chinese brokerage industry is positive, with expected profit growth of nearly 20% for the year [28].