Core Viewpoint - The article discusses the significant market reactions following the announcement of reciprocal tariffs by the U.S. and China's subsequent countermeasures, highlighting the volatility in the Hong Kong stock market and the implications for investors [1][3][4]. Market Reaction - Following the announcement of tariffs, the Hang Seng Index experienced a record single-day drop of 13.2%, the largest since the 21st century, while the Hang Seng Tech Index fell by 17.2%, marking its biggest decline since its inception in 2014 [1]. - In the subsequent days, the market rebounded due to positive signals from the central government and record inflows from southbound funds, but the overall decline for the Hang Seng Index reached 8.5% for the week, the largest weekly drop since 2018 [1][3]. Sector Performance - The consumer discretionary sector faced the most pressure, declining by 10.7%, followed by media and entertainment at 10.4%, and insurance at 10.1%. Conversely, the essential consumer sector saw a slight increase of 0.4% [1]. Valuation Insights - The article notes that the Hang Seng Tech Index's dynamic P/E ratio fell from 19.1x in mid-March to 14.0x, below the three-year average, indicating a potential buying opportunity in tech stocks [6]. - The article also highlights that the AH premium has increased from a low of 128% to 142%, suggesting a relative advantage for Hong Kong stocks compared to A-shares [10][12]. Future Outlook - The article emphasizes that the market's focus may shift from tariff numbers to the actual impact on growth and earnings, with the need for domestic policy support becoming crucial [9][12]. - It suggests that if domestic demand policies are timely and effective, the negative impact on earnings from tariff increases may be mitigated [14]. Capital Flows - Southbound funds have become a significant driver of the market, with record inflows observed, indicating strong interest from investors looking to "buy the dip" in Hong Kong stocks [17]. - In contrast, active foreign capital has been flowing out, with a notable outflow of $6.9 billion in the past week, suggesting a cautious stance from long-term foreign investors amid escalating trade tensions [19]. Investment Strategy - The article recommends that investors who have already reduced their positions or shifted to dividend-paying stocks may consider gradually buying at current levels, while those with higher exposure should maintain flexibility [24]. - It identifies technology stocks with supportive narratives and low export exposure as key investment themes, alongside dividend assets [24].