Looking ahead, China Galaxy Securities released a research report stating that with the Fed's near-term interest rate cut expectations diminishing and global geopolitical uncertainty escalating, the Hong Kong stock market is anticipated to experience narrow-range fluctuations. For allocation strategies, the report suggests focusing on the following sectors: (1) The technology sector remains a medium-to-long-term investment theme, benefiting from multiple tailwinds including supply chain price increases, import substitution, and the accelerated advancement of AI applications. (2) The consumer sector is expected to continue benefiting from policy support, with future performance contingent on the implementation strength of these policies and improvements in consumption data. (3) As geopolitical tensions intensify, safe-haven assets like precious metals are poised to benefit.
Overseas, the US CPI for December 2025 rose 2.7% year-on-year, while core CPI increased by 2.6%, both figures remaining unchanged from previous readings. US PPI for November grew 3% year-on-year, surpassing the estimated 2.7%. Initial jobless claims in the US for the past week decreased by 9,000 to 198,000, significantly below market expectations of 215,000 and marking the lowest level since last November. Divergence persists within the Fed's policy stance, with some officials adopting a hawkish tone, leading to reduced expectations for interest rate cuts.
Domestically, China's total foreign trade import and export volume reached 45.47 trillion yuan in 2025, a year-on-year increase of 3.8%, marking the ninth consecutive year of growth. The cumulative increment in China's total social financing for 2025 was 35.6 trillion yuan, 3.34 trillion yuan more than the previous year. The M2-M1 scissor difference at the end of December 2025 was 4.7 percentage points, widening from 3.1 percentage points in the previous month.
Performance of the Hong Kong stock market last week: (1) From January 12th to January 16th, most major global stock indices rose. Among them, Hong Kong's three major indices were among the top performers, with the Hang Seng Index up 2.34%, the Hang Seng Tech Index up 2.37%, and the Hang Seng China Enterprises Index up 1.90%. (2) At the sector level in Hong Kong: Among primary industries, 9 sectors advanced while 2 declined last week. The Materials, Consumer Staples, and Information Technology sector indices led the gains, rising 4.31%, 3.91%, and 3.60% respectively; the Communication Services and Industrials sector indices led the declines, falling 0.54% and 0.15% respectively. Looking at secondary industries, the Semiconductor, Consumer Staples Retailing, Consumer Discretionary Retailing, Enterprise Services, and Nonferrous Metals sector indices were the top performers last week, while the Durable Consumer Goods, Electrical Equipment, Defense & Military Industry, Telecommunication Services, and Transportation sector indices were among the biggest decliners.
Hong Kong stock market liquidity last week: (1) The average daily turnover on the Hong Kong Exchanges was HKD 301.694 billion, an increase of HKD 28.584 billion from the previous week. (2) Southbound capital recorded a cumulative net inflow of HKD 10.046 billion for the week, a decrease of HKD 22.648 billion compared to the net inflow of the previous week. (3) In the seven days up to January 14th, among Hong Kong-listed China concept stocks, global active foreign funds saw a net inflow of USD 163 million, while global passive foreign funds saw a net inflow of USD 2.661 billion, representing increases of USD 214 million and USD 1.074 billion respectively compared to the previous week's net inflows.
Hong Kong stock valuations and risk appetite: (1) As of January 16, 2026, the PE and PB ratios of the Hang Seng Index were 12.20x and 1.24x respectively, up 0.44% and 0.52% from the previous Friday, placing them at the 80th and 58th percentiles respectively since 2010. (2) The yield on the 10-year US Treasury note rose 6 basis points from the previous Friday to 4.24%, resulting in a risk premium rate for the Hang Seng Index of 3.95%, which is -1.87 standard deviations from its 3-year rolling mean, at the 3rd percentile since 2010. The yield on the 10-year Chinese government bond fell 3.58 basis points from the previous Friday to 1.8424%, leading to a risk premium rate for the Hang Seng Index of 6.35%, which is -1.76 standard deviations from its mean (3-year rolling), at the 39th percentile since 2010. (3) The Hang Seng Stock Connect AH Premium Index decreased by 2.30 points from the previous Friday to 120.43, standing at the 17th percentile level since 2014.
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