Core Viewpoint - The Hong Kong stock market is experiencing significant structural changes in both company and investor composition, suggesting a potential systemic uplift in valuations, with the equity risk premium (ERP) likely to decline in the medium to long term [3][4]. Group 1: Market Performance - The Hang Seng Index has increased by 29.15% and the Hang Seng Tech Index by 32.23% in the first ten months of the year, indicating a bullish market [2]. - The current market performance is primarily driven by valuation expansion, yet the overall valuation remains relatively low compared to global peers [2]. Group 2: Earnings Expectations - There has been a continuous upward revision in earnings expectations for many companies, reflecting a positive outlook for corporate profitability [2]. - In a neutral scenario, the potential return for the Hang Seng Index next year is estimated at approximately 22.92%, with an optimistic scenario reaching up to 33.83% [2]. Group 3: Structural Changes - The industry and investor structures in the Hong Kong market have undergone profound changes, with the technology sector's market capitalization and trading volume surpassing that of traditional sectors over the past decade [4]. - The current ERP in the Hong Kong market is around 5%, a low level not seen since early 2018, indicating potential for valuation uplift [3]. Group 4: Offshore Market Dynamics - The Hong Kong market's offshore characteristics lead to a higher volatility in ERP compared to other major global markets, with historical lower bounds around 4% [4][5]. - The proportion of trading through the Stock Connect program is approximately 25%-30%, which is on an upward trend, indicating a shift towards reducing the offshore discount and aligning valuations with global markets [5].