Core Viewpoint - After a significant market correction, QDII investments in Hong Kong stocks have outperformed major global markets, with the Hang Seng Index rising by 20% in the first half of the year, and the Hang Seng Tech Index increasing by 18.68% [1] Group 1: Market Performance - The Hang Seng Index and Hang Seng Tech Index have significantly outperformed major indices in developed markets such as the US and Japan [1] - Despite a major pullback in April due to Trump's tariffs, the market quickly rebounded, entering a "technical bull market" [1] - Individual stocks like Pop Mart, Mixue Group, and Laopu Gold have shown remarkable price increases [1] Group 2: QDII Fund Performance - QDII funds focused on Hong Kong stocks have dominated the performance rankings, with the top ten funds all being Hong Kong-focused [1] - As of July 4, the Huatai-PB Hang Seng Innovation Drug ETF and other funds have shown substantial gains, with the top fund, Huatai-PB Hong Kong Advantage Selection A, achieving a 97.16% return [3][4] - A total of 18 QDII funds have reported returns exceeding 50% this year, particularly those heavily invested in innovative pharmaceuticals [7] Group 3: Capital Inflows - Southbound capital has seen a net inflow of 739.865 billion HKD this year, doubling compared to the same period last year, which is a key driver for the rebound in Hong Kong stocks [9] - New QDII fund issuances continue to bring in additional capital, with 24 new QDII funds launched this year, primarily focused on Hong Kong themes [11][10] Group 4: Market Outlook - Analysts believe that the current favorable conditions for Hong Kong stocks are due to a combination of fundamental recovery and improved liquidity [12] - The market has experienced two significant rallies this year, driven first by new economy sectors and later by increased capital inflows amid trade uncertainties [12] - The technology sector is highlighted as having substantial investment value, with foreign capital showing long-term confidence in this area [12]

Core Insights - The report highlights a strong performance of Hong Kong stocks in the first half of 2025, with the Hang Seng Index and Hang Seng Tech Index recording returns of 20% and 18.7% respectively, placing them among the top global indices [3][4] - The report identifies a structural tilt in southbound capital allocation towards healthcare and financial sectors, while foreign capital remains focused on technology, indicating a preference for long-term competitiveness and valuation recovery in Hong Kong tech firms [3][4] Southbound Capital Trends - Southbound capital has increased holdings across various sectors, with notable rotations from information technology in Q1 to new consumption in early Q2, and a recent concentration in healthcare and financial sectors [3] - The report notes that foreign capital has marginally increased its position in the information technology sector, while other sectors have seen a decline in market value [3][4] Short Selling Dynamics - The report discusses the short selling landscape, indicating high levels of short selling in cyclical sectors such as telecommunications, real estate, energy, and materials, with minimal changes observed [4] - Consumer sectors show a clear divergence, with stable essential consumption contrasting with rising short selling in discretionary consumption [4] - The concentration of short selling in the information technology sector is decreasing, suggesting a convergence of long and short positions, which may indicate reduced volatility and the potential for upward trends [4] Investment Opportunities - The technology sector is highlighted as having significant investment value, supported by foreign capital's continued investment and the convergence of short selling positions, which may lead to lower volatility and emerging trends [4] - The report emphasizes that a transition from a structural market to a comprehensive upward trend in Hong Kong stocks requires stronger fundamental support and policy catalysts [4]