- The "Hong Kong Stock Selection Portfolio" model aims to construct a portfolio by dual-layer screening based on fundamental and technical aspects of analyst-recommended stocks. The analyst recommendation pool is built using events such as upward earnings forecast revisions, initial analyst coverage, and unexpected research report titles. Stocks with both fundamental support and technical resonance are selected to form the portfolio. The backtesting period is from January 1, 2010, to December 31, 2025, with an annualized return of 19.08% and an excess return of 18.06% relative to the Hang Seng Index[13][15][19] - The "Stable New High Stock Screening" factor identifies stocks that have reached a 250-day high in the past 20 trading days. The calculation formula for the 250-day new high distance is: $ 250\text{-day new high distance} = 1 - \frac{\text{Close}_{t}}{\text{ts\_max(Close, 250)}} $ where $\text{Close}_{t}$ represents the latest closing price, and $\text{ts\_max(Close, 250)}$ is the maximum closing price over the past 250 trading days. A value of 0 indicates a new high, while positive values represent the degree of fallback. Stocks are further filtered based on analyst attention, relative price strength, price stability, and trend continuation metrics[20][22][23] - The "Stable New High Stock Screening" factor uses additional criteria for filtering: - Analyst attention: At least 5 buy or overweight ratings in the past 6 months - Relative price strength: Top 20% in 250-day returns within the sample pool - Price stability: Evaluated using metrics like price path smoothness and average 250-day new high distance over the past 120 days - Trend continuation: Average 250-day new high distance over the past 5 days[23] - The backtesting results for the "Hong Kong Stock Selection Portfolio" model show annualized return of 19.08%, excess return of 18.06%, and various performance metrics such as IR of 1.19, tracking error of 14.60%, and maximum drawdown of 23.73%[19] - The "Stable New High Stock Screening" factor identified stocks across sectors, with the highest number in the cyclical sector (8 stocks), followed by technology (2 stocks), manufacturing (1 stock), consumer (1 stock), and healthcare (1 stock)[22][23][27]

- The report constructs a prediction model for the periodic adjustment of Hong Kong Stock Connect constituent stocks based on the inclusion and exclusion rules of the index. The model uses historical data from 2016 H2 to 2025 H1, covering 18 adjustment periods, to analyze the market effects of inclusion and exclusion events[3][19][41] - The inclusion effect shows that stocks added to the index typically achieve significant excess returns from the announcement date to the effective date, with an average cumulative return of 5.45% during this window. Conversely, excluded stocks exhibit negative returns, with an average cumulative return of -9.58% during the same period[3][19][40] - The prediction model demonstrates high recall rates for inclusion predictions and high precision rates for exclusion predictions. For example, in the June 2025 adjustment, the inclusion prediction achieved a recall rate of 1.00 and a precision rate of 0.83, while the exclusion prediction achieved a precision rate of 0.92 and a recall rate of 0.60[41][43] - The inclusion effect is characterized by short-term trading opportunities, with excess returns peaking shortly after the effective date and then declining. The exclusion effect, on the other hand, shows a more consistent and predictable downward trend, making it a more reliable signal for event-driven strategies[19][27][39] - The model's prediction results for March 2026 indicate that the predicted inclusion stocks have an average daily market capitalization exceeding HKD 90 billion, with a focus on the healthcare and information technology sectors. Predicted exclusion stocks, however, have a lower average market capitalization, mostly ranging between HKD 30 billion and HKD 55 billion, and are concentrated in non-essential consumption and traditional industries[43][44][47]

Group 1 - The report indicates that the Hong Kong stock market is currently in a consolidation phase, with short-term focus on sectors such as oil and gas, non-ferrous metals, and military industries due to geopolitical tensions [3] - The Hang Seng Technology Index has been under pressure, leading to a decline in investor confidence, particularly as concerns about AI persist and the recent Nvidia earnings report failed to boost the tech sector [3][4] - The report highlights a significant inflow of funds into ETFs targeting the Hong Kong market, with a total scale reaching 444.26 billion, an increase of 13.64 billion, indicating a growing interest in TMT, technology, and manufacturing sectors [2][4] Group 2 - The report notes that the market is awaiting the outcomes of the "Two Sessions," with expectations that policies will continue to focus on supply-side reforms, particularly in technology and infrastructure investments [3] - The report emphasizes that the performance of the Hong Kong stock market is sensitive to geopolitical risks, particularly the ongoing US-Iran conflict, which may affect oil prices and inflation expectations [3] - The report mentions that the net inflow of southbound funds has slowed, with the proportion of Hong Kong stock trading volume decreasing to 32% this week, indicating a cautious market sentiment [1][9]

Core Viewpoint - The Hong Kong stock market has experienced significant divergence in performance, with certain sectors like materials and real estate seeing substantial gains, while technology and non-essential consumer sectors have faced declines. This divergence is attributed to a fundamental shift in market pricing logic from "storytelling" to "performance" and "policy certainty" [2][3]. Group 1: Sector Performance - The Hang Seng Composite Industry Index showed extreme divergence, with materials up 23.62%, real estate up 20.02%, energy up 18.8%, and industrials up 15.87%. In contrast, information technology fell 9.74%, telecommunications dropped 2.39%, and non-essential consumer goods slightly declined by 0.65% [1]. - The real estate sector benefited from policy confirmations aimed at stabilizing the market, leading to a valuation recovery and a 20.74% increase in real estate management and development sub-sectors [3]. - The energy sector saw significant gains, with oil and gas up 15.99% and coal up 21%, driven by rising commodity prices and improved demand expectations [4]. Group 2: Drivers of Divergence - The first driver of divergence is the unexpected strength of growth-stabilizing policies, which alleviated risks in the real estate chain, leading to a recovery in the real estate sector [3]. - The second driver is the continuous rise in commodity prices, supported by domestic growth policies and a weaker dollar, which positively impacted the performance of the energy and materials sectors [4]. - The third driver is the significant pressure on the information technology sector, stemming from a restructuring of industry logic, mismatched index structures, and sensitivity to liquidity changes [5]. Group 3: Consumer Sector Insights - The consumer sector displayed internal divergence, with essential consumption rising by 5.71% while non-essential consumption fell by 0.65%, indicating a cautious consumer sentiment [6]. - Within non-essential consumption, specialized retail dropped by 10.91%, reflecting a lack of confidence in discretionary spending [6]. - Financial services, utilities, and healthcare sectors showed moderate gains, benefiting from stable cash flows but lacking strong catalysts for growth [6]. Group 4: Future Market Outlook - The current divergence in the market is expected to continue in the short term, with a focus on the upcoming national policy measures and real estate sales data [7]. - The technology sector may remain under pressure, with attention on changes in U.S. Federal Reserve interest rate expectations and the commercialization progress of AI by leading companies [7]. - Mid-term, profitability certainty is anticipated to become a core pricing anchor, with two main lines to watch: cyclical recovery in domestic economy and the growth potential of AI-related companies [7].

Core Viewpoint - The Hong Kong stock market has shown volatility post-Spring Festival, with public funds actively positioning themselves to seize future opportunities, particularly in technology and cyclical sectors [1][2]. Market Performance - As of February 25, the Hang Seng Index has increased by 0.22%, while the Hang Seng Technology Index has decreased by nearly 2%. Various sectors have shown mixed performance, with telecommunications, energy, industrials, and materials rising, while consumer staples, conglomerates, and healthcare sectors have faced adjustments [2]. - Notable individual stock performances include significant increases for companies like Dachen Microline Group and Jiu Yuan Group, while Tencent Holdings and Alibaba have seen declines [2]. Fund Positioning - Multiple fund institutions maintain a positive outlook on Hong Kong stocks, with significant inflows into ETFs focused on this market. For instance, the Huatai-PB Hang Seng Technology ETF saw an increase of 13.436 billion shares, while several other ETFs also reported substantial share increases [2]. - Active funds are also adjusting their portfolios to include major Hong Kong internet stocks, indicating a strategic focus on these companies [3]. Long-term Investment Outlook - According to Huaxia Fund, the current market conditions may present a valuable investment window for Hong Kong stocks, driven by attractive valuations and expectations of improved liquidity. The market is experiencing a convergence of factors such as low historical valuations and continued inflows from southbound capital [4]. - Fund managers from various institutions express optimism about the potential for valuation recovery in Hong Kong stocks, supported by improving corporate performance and favorable macroeconomic conditions, including a potential decline in U.S. interest rates [4]. Sector Focus - The technology sector remains a primary focus for investment, with expectations of explosive growth in AI-related capital expenditures. Major domestic internet companies are anticipated to maintain stable growth, enhancing both earnings and valuations [5][6]. - The ongoing economic transformation and industrial upgrades in China are expected to provide significant support for the valuation of Hong Kong's technology sector, despite short-term fluctuations in interest rate expectations [5].

Core Viewpoint - The Hong Kong stock market has experienced fluctuations since the start of the Year of the Rabbit, with a notable performance in the technology sector, particularly in semiconductors, driven by AI advancements and upcoming earnings disclosures [1][2]. Market Performance - Since the market opened after the Lunar New Year (February 20-24), the Hang Seng Index has decreased by 0.43%, the Hang Seng China Enterprises Index by 0.69%, and the Hang Seng Technology Index by 1.80%. However, since January 2026, the Hang Seng Technology Index has dropped over 4%, while the other two indices have seen gains [1]. - Various sectors have shown positive performance, with telecommunications, energy, and industrial sectors leading with increases of 2.62%, 2.48%, and 2.43% respectively. Other sectors like materials, information technology, finance, and discretionary consumption have seen slight increases, while consumer staples, conglomerates, and healthcare have declined [1]. Individual Stock Performance - Nearly half of the stocks in the Hong Kong market have risen since the Lunar New Year, with notable gainers including Dachen Microline Group (over 100%), Jiuyuan Group, Putian Communication Group, and Yabo Technology Holdings (over 50%), and several others with gains exceeding 20% [2]. - Stocks with a market capitalization exceeding HKD 1 trillion have seen over 60% increase since the Lunar New Year, including China Petroleum (over 4%), China National Offshore Oil Corporation, Agricultural Bank of China, and Zijin Mining (over 1%) [2]. Semiconductor Sector Strength - On February 24, the Wind Hong Kong Semiconductor Index continued its upward trend, rising by 2.00% after an initial dip, with significant gains from stocks like Weizhi Holdings (13.79%), Zhaoyi Innovation (11.91%), and Puda Technology (10.91%) [2]. - The strength in the semiconductor sector is attributed to rising AI computing demands and breakthroughs in domestic equipment and components, leading to increased market confidence [2]. Future Outlook - Looking ahead to 2026, ongoing domestic industrial policies and measures to reduce competition are expected to improve manufacturing profitability and overall demand for upstream components and equipment [3]. - Analysts suggest three key areas for future investment: rising geopolitical risks leading to increased interest in precious metals and energy, low valuations in the consumer sector with potential for growth, and the technology sector as a long-term investment focus due to ongoing advancements in AI [3][4]. Technology Sector Insights - The technology sector has shown strong performance, with new AI model stocks like MINIMAX-WP and Zhiyu showing significant upward trends, while traditional internet giants have faced adjustments [4]. - Current valuations in the Hong Kong technology sector are at historical lows, indicating potential for future growth as AI development continues [4].

Core Viewpoint - The U.S. labor market shows signs of stabilization with unexpected job growth in January, which may influence the Federal Reserve's interest rate decisions, although underlying risks remain [1][3]. Employment Data - In January, the U.S. added 130,000 non-farm jobs, significantly exceeding market expectations of 50,000 to 75,000, marking the largest increase since mid-2025 [3]. - The unemployment rate decreased by 0.1 percentage points to 4.3% [3]. - Job growth was observed in healthcare (82,000 jobs), social assistance (42,000 jobs), and construction (33,000 jobs), while federal government and financial sectors saw job losses [3]. - Average hourly earnings for private sector non-farm employees rose by $0.15 to $37.17, reflecting a year-on-year increase of 3.7% [3]. Market Reactions - Following the employment data release, spot gold prices dropped nearly $40, the U.S. dollar index rose by 50 points, and U.S. Treasury yields increased significantly [3]. Employment Trends - Despite the positive January data, the overall employment indicators remain weak, with only 22,000 jobs added in the private sector according to ADP, indicating ongoing challenges in the job market [5]. - The labor market added only 584,000 jobs in 2025, the worst performance since 2020, with a downward revision of 898,000 jobs for the previous year [4][6]. Economic Outlook - Economists warn against over-optimism regarding the January job growth, suggesting that the increase may not signify a substantial shift in employment trends [6]. - The rise in healthcare jobs is seen as a potential vulnerability, with concerns that any slowdown in this sector could negatively impact the overall job market [6]. Federal Reserve Policy Implications - The employment market's performance is a key consideration for the Federal Reserve regarding future interest rate cuts, with a recent increase in the probability of maintaining current rates [8]. - Economic advisors suggest that a slight reduction in job growth may be reasonable given the context of high GDP growth and rising productivity [8]. - The Fed's Chairman Powell noted the complexities in interpreting labor market dynamics, emphasizing the need to understand whether labor supply constraints are due to demand or supply factors [9].

Group 1 - The January non-farm employment report, delayed due to the U.S. government shutdown, is expected to reveal a moderate slowdown in job growth, with an anticipated addition of approximately 70,000 jobs, slightly above December's 50,000 [1] - The core characteristic of the current U.S. labor market is a structural balance of "low hiring, low layoffs," indicating that while there are no large-scale layoffs, the pace of job creation has significantly slowed [6] - The upcoming report will include an annual benchmark revision, which could potentially revise employment data down by as much as 910,000, marking a historical record, although some analysts expect the final adjustment to be around 720,000 [7] Group 2 - Discrepancies within the Federal Reserve regarding the interpretation of revised employment data have emerged, with some officials suggesting that job growth may have been overestimated, while others argue that the economy remains resilient enough to maintain current interest rates [8] - The labor market is experiencing a return to normalcy rather than a sudden collapse in demand, driven by demographic changes and labor supply constraints, rather than a drastic drop in demand [9] - The healthcare sector remains one of the few areas still expanding, but its sustainability will be crucial for assessing the stability of employment structures [6]

Core Viewpoint - The Hang Seng Index Company announced that the technology and biotechnology sectors will perform prominently in the Hong Kong stock market in 2025, with both the Hang Seng Technology Index and the Hang Seng Biotechnology Index achieving their best annual performance since their inception. In this context, the Hang Seng Dual Technology Index will be launched in January 2026, combining the constituents of both indices into a single index to highlight these two key themes [1][3]. Group 1: Performance of Indices - The Hang Seng Technology Index recorded a 23.5% increase in 2025, marking its highest annual growth since its launch in July 2020 [3]. - The Hang Seng Biotechnology Index achieved a remarkable 64.5% increase in 2025, representing its best annual performance since its inception in December 2019 [3]. - The strong performance of these indices is driven by structural factors and improvements in fundamentals [3]. Group 2: Industry Trends - The technology sector in China is a focal point, receiving clear and long-term policy support, with "significantly improving the level of technological self-reliance" being a major goal in China's 14th Five-Year Plan (2026-2030) [6]. - Artificial intelligence (AI) has become a key area of market focus, with Chinese AI models gaining global recognition [6]. - The Hang Seng Technology Index represents 30 of the largest technology companies listed in Hong Kong, focusing on areas such as smart technology, cloud computing, digital commerce, and fintech [6]. Group 3: Biotechnology Sector - The Chinese biotechnology sector has gained significant attention due to the increasing global recognition of innovative drugs developed in China, with the total value of outbound licensing transactions for innovative drugs reaching a record high of $136 billion in 2025 [7]. - This record transaction volume indicates a significant enhancement in the global competitiveness and technical capabilities of the Chinese biotechnology industry [7]. - The Hang Seng Biotechnology Index, which tracks the performance of the largest 30 biotechnology companies listed in Hong Kong, recorded a historic 64% annual increase in 2025 and continued to rise by 9% in January 2026 [8]. Group 4: Launch of the Hang Seng Dual Technology Index - The Hang Seng Dual Technology Index, launched on January 9, 2026, combines the two themes of technology and biotechnology, with a weight allocation of 75% to the Hang Seng Technology Index and 25% to the Hang Seng Biotechnology Index [12]. - The index recorded a 36% increase in 2025, with a continued upward trend into 2026, reflecting ongoing market interest in Chinese innovation themes [12]. - As of January 30, 2026, the index had a one-year annualized volatility of 34%, lower than the 35% and 40% of the Hang Seng Technology Index and Hang Seng Biotechnology Index, respectively, indicating a balanced risk profile [12].

A-Share Market - The A-share market exhibited a volatile trend this week, with an average daily trading volume of 3.06 trillion, reflecting a week-on-week increase of 9.44% [6] - Major indices showed mixed performance, with large-cap indices like the Shanghai 50 and CSI A100 recording positive returns, while the Shanghai Composite and Shenzhen Component indices experienced declines [6] - Sector performance was diverse, with cyclical and value sectors such as oil, petrochemicals, telecommunications, coal, and non-ferrous metals performing well, while growth sectors like computers, power equipment, new energy, and automobiles faced significant declines [6] - The market displayed structural characteristics and volatility, with precious metals and resource cyclical sectors initially strong but later retreating due to fluctuations in international gold prices, indicating rapid shifts in market sentiment and short-term speculative influences [6][7] - AI and technology growth stocks continued to attract capital, as evidenced by the strong performance of the Sci-Tech 50 index, supporting the investment logic in growth directions [6] Outlook for A-Share Market - The short-term outlook suggests a continuation of structural trends, but increased volatility is anticipated. Cyclical sectors that were previously strong may face correction pressures if lacking sustained catalysts [7] - With the Spring Festival approaching, the period after the festival until the Two Sessions may present a more certain upward trend, suggesting opportunities for strategic positioning post-festival [7] Hong Kong Market - The Hong Kong market showed strong overall performance this week, with major indices rising, including a 2.38% increase in the Hang Seng Index and a 1.71% rise in the Hang Seng China Enterprises Index [8] - The Hang Seng Technology Index experienced a slight decline of 1.38%, indicating volatility within the technology sector [8] - Leading sectors included energy (7.44%), real estate and construction (5.71%), and finance (5.3%), while information technology and healthcare sectors saw slight declines [8] - The market exhibited complex and differentiated characteristics, with a rebound in property stocks due to rising policy expectations, while gold and non-ferrous metal stocks experienced significant fluctuations influenced by international gold price volatility [8] - Despite a slight decline in the Hang Seng Technology Index, certain AI concept stocks like Baidu and Alibaba remained active due to advancements in AI chips, highlighting the sustained appeal of AI as a long-term driver [8] Outlook for Hong Kong Market - The outlook for the Hong Kong market suggests a potential continuation of structural upward trends, supported by expectations of interest rate cuts from the Federal Reserve and a recovery in A-share sentiment [9] - Continued improvement in AI demand is expected to benefit the technology sector in Hong Kong, although investors should remain cautious of external policy uncertainties and consider a prudent allocation strategy, focusing on high-dividend assets and sectors with both profitability improvement and growth potential [9]