Investment Rating - The report indicates that the Hong Kong stock market is currently undervalued, particularly in sectors such as retail, media entertainment, and consumer services, with a static valuation at historical lows [1][2]. Core Insights - The report highlights that the recent market rebound is primarily driven by risk premiums and optimistic expectations stemming from the AI industry's impact on technology sector revaluation [1][3]. - It notes a trend of global capital flow shifting towards Asia, benefiting Hong Kong stocks from southbound capital inflows and enhanced technology sector trends [1][3]. - The report emphasizes the importance of monitoring macroeconomic conditions and policy changes for the sustainability of this trend in the long term [4]. Summary by Sections Market Valuation - The static valuation of the Hong Kong market is relatively low, with the Hang Seng Index at the 61st percentile historically, while the Hang Seng Technology Index is around 20 times earnings, significantly lower than its peak in 2021 [2][7]. - The report suggests that while static valuations are low, dynamic valuations appear elevated, indicating a potential for emotional market overextension [7]. Market Sentiment - Market sentiment has been significantly influenced by AI narratives and capital sources, with southbound capital inflows leading to a rapid decline in AH premiums, indicating a strong impact on valuation and pricing power [5][6]. - The report identifies that the current market sentiment is relatively exuberant, with the Hang Seng Index's equity risk premium at approximately 5.7%, close to historical lows since 2021 [3][5]. Investment Strategy - The report recommends a balanced investment strategy focusing on technology sector trends while incorporating stable dividend returns [10]. - It suggests a bottom-up stock selection approach, targeting new consumption and overseas markets to optimize investment outcomes [10]. Fiscal Policy Outlook - The report anticipates a significant increase in fiscal debt issuance in 2025, with a focus on new growth drivers and livelihood sectors, which is expected to enhance monetary circulation and reduce risk premiums [16][19]. - It highlights that the fiscal execution pace in 2025 is expected to be front-loaded, with a proactive approach to address potential economic challenges [21]. Global Capital Flows - The report discusses the "East rises, West falls" trend in global capital flows, indicating that Hong Kong and European markets are performing well while U.S. markets remain weak [11][12]. - It notes that this trend is driven by factors such as AI developments, fiscal policies, and geopolitical relationships, which are crucial for understanding market dynamics [11][12]. Sector-Specific Insights - The technology sector is highlighted as having absolute valuations that remain attractive, although profitability differences among companies should be considered [7][8]. - The report suggests that if technology stocks return to their 2021 highs, the Hang Seng Index could reach approximately 25,000 points, although this does not guarantee a correction or inability to break through that level [7].

Core Viewpoint - The article discusses the divergence between Chinese and American assets, highlighting the potential for A-shares to perform independently amid a challenging U.S. market environment [13][14]. Group 1: Market Trends - A-shares in the TMT sector have seen trading volume exceed 40% for the first time in five years, mirroring trends in the U.S. tech sector [3]. - The divergence between AH technology stocks and U.S. tech stocks has widened, with the negative correlation between the ChiNext 50 and Nasdaq 100 reaching -0.78 [13]. - Major foreign banks have shifted their outlook to bullish on Chinese stocks and technology [5]. Group 2: U.S. Market Challenges - The U.S. market is experiencing a confidence crisis, with significant layoffs announced, totaling 220,000 since the beginning of the year, the highest since 2009 [7]. - The GDPNow model predicts a -2.8% growth rate for the U.S. in Q1 2025, indicating downward pressure on the U.S. economy [9]. - The MAG7 index has seen a decline of 15.7% over 54 trading days, surpassing previous adjustment periods in both duration and magnitude [22]. Group 3: Implications for A-shares - A-shares may attract global capital if their fundamentals significantly outperform those of U.S. stocks [10]. - The potential for A-share valuation increases exists if the Chinese economy shows signs of recovery while the U.S. economy remains stagnant [26]. - The narrative of a "soft landing" in the U.S. could be beneficial for AH assets, with ongoing developments in AI and robotics sectors providing investment opportunities [35][36]. Group 4: Sector-Specific Insights - The real estate sector in China has shown mixed signals, with a cumulative year-on-year increase in transaction volume of 2.25% as of March 8 [38]. - The automotive market has seen a 26% year-on-year increase in retail sales for February, with significant growth in the new energy vehicle segment [39]. - In the steel industry, the average daily production has increased by 12.96% compared to mid-February, indicating a recovery in demand [40]. Group 5: Economic Indicators - The U.S. manufacturing PMI for February stands at 50.30, indicating stability in the manufacturing sector [46]. - China's official manufacturing PMI for February is reported at 50.2, reflecting a slight improvement from the previous month [49]. - The recent MLF injection by the People's Bank of China totaled 300 billion yuan, maintaining stable monetary policy [50].