Core Insights - The report highlights the significant impact of fluctuating tariff policies from the Trump administration on the Hong Kong stock market, particularly noting a record high in net inflows from southbound funds during market downturns [4][5]. - Southbound funds exhibit a "buy on dips" strategy, showing a negative correlation with the Hang Seng Index's returns, particularly during extreme market conditions [8][9]. - The investment style of southbound funds has shifted towards technology growth sectors in 2025, reflecting an increased risk appetite amid changes in domestic AI industry dynamics [12][14]. Market Behavior Analysis - Southbound funds have demonstrated a consistent pattern of increasing net purchases during significant market declines, with a notable case on April 2, 2025, when the Hang Seng Index dropped by 13.22% but saw a net inflow of HKD 15.373 billion [6][11]. - The report identifies "abnormal drop points" based on specific criteria, capturing various market turmoil periods, including the COVID-19 pandemic and inflation concerns from 2022 to 2023 [6][11]. Sector Preferences - In the first quarter of 2025, southbound funds favored high-dividend sectors such as energy and telecommunications, but have recently shifted focus towards technology and non-essential consumer sectors due to improved domestic conditions [12][14]. - The report notes substantial net inflows into the financial sector (HKD 23.78 billion) and significant investments in non-essential consumption (HKD 49.48 billion) and information technology (HKD 27.78 billion) during the recent tariff shocks [14][15]. Future Outlook - The report anticipates a period of consolidation for the Hong Kong stock market, suggesting a "barbell" investment strategy that gradually increases exposure to technology growth sectors [17]. - It emphasizes that sectors with higher domestic influence, such as telecommunications, utilities, and healthcare, are likely to experience less volatility amid external pressures, while sectors benefiting from domestic consumption policies may also see positive impacts [17].