Group 1: Market Performance Review - The Hong Kong stock market experienced a significant decline due to renewed US-China trade tensions and profit-taking after previous gains, with the Hang Seng Index, Hang Seng Tech Index, and Hang Seng Composite Index dropping by -4.11%, -3.97%, and -7.98% respectively [3][10][13] - Defensive sectors such as utilities and telecommunications showed resilience, while previously high-performing sectors like technology and healthcare faced substantial corrections [3][10][13] Group 2: Market Valuation Levels - As of the end of the week, the 5-year PE (TTM) valuation percentile for the Hang Seng Composite Index stood at 81.45%, indicating that the valuation level is close to one standard deviation above the 5-year average [3] Group 3: Market Macro Environment - The macroeconomic environment shows weak inflation in September, with CPI down by 0.3% year-on-year, while PPI decreased by 2.3% [37][43] - The central bank's monetary policy remains supportive, with a focus on enhancing domestic demand and stabilizing growth through proactive measures [37][43] Group 4: Fund Flow Analysis - Southbound capital showed strong buying interest, with a net inflow of 45.089 billion HKD, marking a new high in five weeks and maintaining a streak of 22 consecutive weeks of net inflows [43] - The top net buying companies included Pop Mart, Xiaomi, and China Mobile, indicating a preference for consumer discretionary and technology sectors [32] Group 5: Sector Allocation Outlook - The report favors sectors that are relatively prosperous and benefit from policy support, such as automotive, new consumption, innovative pharmaceuticals, and technology [3][43] - Low-valuation state-owned enterprises and local Hong Kong banks, telecommunications, and utility stocks are also highlighted as stable performers benefiting from the interest rate cut cycle [3][43]

Core Viewpoint - The fixed income market is experiencing credit concerns, leading to a decline in yields, particularly in the 10-year Treasury, which is currently below 4%, marking the lowest level in some time [1][2]. Fixed Income Market Analysis - The 10-year Treasury is expected to trade in a rangebound manner, with the current level potentially being the lower end of that range, influenced by psychological factors at the 4% mark [3]. - There is a lack of catalysts in the fixed income market, primarily due to the government shutdown, which has limited the flow of data [5][6]. - The upcoming Consumer Price Index (CPI) report on the 24th is anticipated to be a significant event, as it is one of the few data points available, although its completeness is in question [6][7]. Federal Reserve Commentary - The Federal Reserve appears divided, with differing views among officials regarding interest rate cuts, with expectations leaning towards a cut this month to mitigate potential labor market deterioration [8][9][12]. - Recent commentary from Fed officials suggests a focus on the labor market, with indications of a softening trend based on the ADP report [10][11].

Group 1: Market Performance Review - The Hong Kong stock market experienced a significant pullback this week due to escalating geopolitical conflicts and the Hong Kong dollar approaching the weak side guarantee, with the Hang Seng Index, Hang Seng Composite Index, and Hang Seng Tech Index declining by -1.70%, -1.52%, and -2.03% respectively [3][13] - Most primary industry sectors saw declines, with the healthcare sector experiencing a substantial drop of nearly 8%, the largest among all sectors, while only the information technology sector saw a slight increase of 0.2% [3][13] - As of the end of this week, the 5-year PE (TTM) valuation percentile of the Hang Seng Composite Index rose to 72%, exceeding the 5-year average [3] Group 2: Macroeconomic Environment - The macroeconomic environment indicates that economic activity data for May continued to weaken, with consumption performance exceeding expectations mainly due to shopping festival timing and subsidies, raising questions about sustainability [3][48] - The Federal Reserve's June meeting maintained the benchmark interest rate, aligning with expectations, but conveyed a hawkish tone emphasizing the impact of tariffs on U.S. inflation [3][46] Group 3: Sector Outlook - The report suggests a favorable outlook for sectors that are relatively prosperous and benefit from policy support, including automotive, new consumption, innovative pharmaceuticals, and technology [3][48] - It also highlights the importance of low-valuation state-owned enterprises that are stable in performance and stock price, as well as local Hong Kong banks, telecommunications, and utility dividend stocks that are relatively independent and benefit from the interest rate cut cycle [3][48] Group 4: Buyback Statistics - The buyback market showed improvement this week, with 55 companies participating, up from 53 the previous week, and total buyback amounts reaching 6.61 billion HKD, a significant increase from 3.96 billion HKD last week [3][27] - Tencent Holdings (0700.HK) led the buybacks with 2.5 billion HKD, followed by Chow Tai Fook (1929.HK) with 1.57 billion HKD, and AIA Group (1299.HK) with 1.15 billion HKD [3][27] Group 5: Southbound Capital Flow - The top net buying companies through the Southbound Stock Connect included China Construction Bank (0939.HK) with a net buy of 3.48 billion HKD, Meituan-W (3690.HK) with 2.49 billion HKD, and China Merchants Bank (3968.HK) with 2.23 billion HKD [3][34] - Conversely, the top net selling companies included Tencent Holdings (0700.HK) with a net sell of 4.81 billion HKD and Alibaba-W (9988.HK) with 4.38 billion HKD [3][35]