Core Viewpoint - The technology sector remains the long-term investment focus in the Hong Kong stock market, with concerns surrounding AI creating buying opportunities. The rise of China's AI capabilities is expected to boost market confidence, although full recovery will take time [1]. Group 1: Market Performance - During the week from February 23 to February 28, global major stock indices showed mixed performance. The Hang Seng Index rose by 0.82%, while the Hang Seng Tech Index and the Hang Seng China Enterprises Index fell by 1.41% and 1.12%, respectively [1]. - In terms of industry performance, five sectors in the Hong Kong stock market increased while six sectors decreased. The materials, real estate, and utilities sectors saw the highest gains, rising by 5.36%, 2.48%, and 1.60%, respectively. Conversely, healthcare, information technology, and consumer discretionary sectors experienced the largest declines, falling by 4.20%, 1.80%, and 1.55% [1]. Group 2: Market Liquidity - The average daily trading volume on the Hong Kong Stock Exchange for the week was HKD 241.836 billion, an increase of HKD 116.578 billion from the previous week [2]. - Cumulative net inflow of southbound funds reached HKD 6.705 billion, a decrease of HKD 21.095 billion compared to the previous week [2]. - For the week ending February 25, global active foreign funds saw a net inflow of USD 238 million into Chinese stocks, while passive foreign funds had a net inflow of USD 2.186 billion, with respective changes of a decrease of USD 83 million and an increase of USD 1.489 billion from the previous week [2]. Group 3: Valuation and Risk Appetite - As of February 27, 2026, the PE and PB ratios of the Hang Seng Index were 11.98 times and 1.23 times, respectively, placing them at the 77% and 55% percentile levels since 2010 [3]. - The yield on 10-year U.S. Treasury bonds decreased by 11 basis points to 3.97%, with the risk premium of the Hang Seng Index at 4.38%, which is -1.40 standard deviations from the 3-year rolling mean, placing it at the 8% percentile since 2010 [3]. - The AH share premium index for the Hong Kong-Shanghai Stock Connect rose by 1.77 points to 118.17, which is at the 12.21% percentile level since 2014 [3]. Group 4: Investment Outlook - Internationally, the U.S. and Israel have launched attacks on Iran, targeting its highest leaders. The U.S. is planning a multi-day operation, with economic issues being a key focus in recent political discussions [4]. - The market may continue to digest emotional disturbances in the short term, but the long-term supportive factors remain unchanged [4].

Market Performance - Global markets experienced a general decline, with MSCI Global down by 2.2%, MSCI Developed down by 2.3%, and MSCI Emerging down by 1.6% [8][15][17] - Among developed markets, the Australian S&P 200 showed the best performance with a decline of only 0.1%, while the French CAC40 was the weakest, down by 3.7% [8][15] - In the emerging markets, the Taiwan Weighted Index was the best performer, up by 0.3%, while the Hang Seng Index was the worst, down by 3.5% [8][15] Trading Sentiment - Trading volume increased across major indices, with the Hang Seng Index reaching 198 billion shares and a turnover of 736.1 billion USD, while the S&P 500 had a turnover of 58.6 billion USD [24] - Investor sentiment in the Hong Kong market improved, with short-selling accounting for 13.5% of total turnover, while North American sentiment showed a decline [24][29] - Volatility increased in the US markets, while it decreased in the Hong Kong market [24][30] Fund Flows - Global macro liquidity expectations turned more accommodative, with the market anticipating 2.4 rate cuts by the Federal Reserve within the year [53][56] - Significant capital inflows were observed in the Hong Kong market, with a total of 18.3 billion HKD flowing in during the last week [61][65] - The net inflow of funds into the Hong Kong market was primarily driven by stable foreign capital, amounting to 13.8 billion HKD [61] Earnings Expectations - The earnings expectations for the Hang Seng Index were revised down from 2195 to 2191 for 2025, with the financial sector seeing the largest upward revision [66][68] - The S&P 500's earnings expectations were adjusted upward from 265 to 267, with the technology sector experiencing the most significant increase [66][68] - The Eurozone STOXX50 index saw a slight downward revision in earnings expectations from 336 to 335 for 2025 [66][68]

Core Viewpoint - The Hong Kong stock market has experienced fluctuations since the end of June due to tariffs and exchange rate impacts, but is expected to outperform the A-share market in the second half of the year as positive factors accumulate [1][3][13]. Market Performance - Since the end of June, the Hong Kong stock market has shown weaker performance compared to the A-share market, primarily influenced by U.S. tariff policies and the Hong Kong dollar's exchange rate [4][7]. - The Hang Seng Index rose by 20% in the first half of the year, outperforming major global indices, including the S&P 500 (5.5%) and the Shanghai Composite Index (2.8%) [3][4]. Sector Analysis - The technology and dividend sectors in Hong Kong are currently less active compared to A-shares, with the overall market heat slightly below historical averages [7][8]. - The healthcare and consumer sectors in Hong Kong show higher activity levels compared to A-shares, with the healthcare sector's heat at 91%, significantly above A-shares' 77% [9][8]. Investment Opportunities - The easing of U.S. chip export restrictions and the acceleration of AI applications are expected to benefit the Hong Kong technology sector, which is well-positioned to capitalize on the AI industry transformation [17]. - The dividend sector in Hong Kong, despite lower heat compared to A-shares, still holds value due to high dividend yields relative to risk-free rates, making it an attractive option for long-term investors [18]. Future Outlook - The Hong Kong stock market is entering a favorable allocation period, with expectations of continued upward movement in the second half of the year driven by supportive policies and improved capital inflows [13][14]. - The anticipated increase in capital expenditure by Hong Kong internet giants in AI infrastructure is expected to enhance the performance of the technology sector [17].