Group 1: Characteristics of Small and Medium-sized Stocks - Small and medium-sized stocks in the Hong Kong market are defined as those with a market capitalization below HKD 30 billion[11] - Companies with a market capitalization below HKD 10 billion account for approximately 77.5% of the total number of companies, but only 3.5% of the total market capitalization[13] - The average daily trading volume for small and medium-sized stocks is only 20%, with 80% of trading concentrated in 200 blue-chip stocks[16] Group 2: Valuation Discounts and Investment Opportunities - Small-cap stocks are currently trading at a significant discount, with a PE ratio of approximately 9.2x and a PB ratio of 0.8x, compared to the Hang Seng Index's 14.8x PE and 1.1x PB[17] - The lack of institutional investor interest and poor liquidity contribute to the low valuation levels of small-cap stocks[17] - High-quality small-cap stocks are identified as having a "low valuation + stable fundamentals + high growth" characteristic, indicating potential investment opportunities[17] Group 3: Market Dynamics and Investor Behavior - Institutional investors dominate the Hong Kong market, with a trading share of 56.5%, while individual investors account for only 15.5%[27] - Foreign institutional investors hold nearly two-thirds of the market capitalization, leading to a preference for high-liquidity large-cap stocks[27] - The lack of research coverage for small-cap stocks results in insufficient market analysis and investor information, further exacerbating their undervaluation[32] Group 4: Performance and Growth Potential - Small-cap stocks have shown significant price elasticity and potential for high returns, with several stocks increasing over 500% since 2024[36] - The growth potential of small-cap companies is enhanced by their ability to quickly adapt to market changes and focus on niche markets[37] - Historical data indicates that small-cap stocks have outperformed large-cap stocks during bull markets, particularly in periods of increased investor risk appetite[41]