The Hang Seng Index opened 0.66% lower, while the Hang Seng Tech Index fell 1.23%. Technology stocks moved lower, with Lenovo Group Ltd (HKG: 0992) dropping over 5%, Bilibili Inc (HKG: 9626) falling more than 2%, and Baidu Inc (HKG: 9888) and Alibaba Group Holding Ltd (HKG: 9988) declining over 1%.
Regarding the outlook for the Hong Kong market, China Galaxy Securities believes the current historically low valuation level of the Hang Seng Tech Index suggests limited room for further significant declines, offering a high margin of safety. In the short term, from a currency perspective, it is advisable to wait for the US dollar to retreat to a reasonable range. Over the medium term, buying before "certainty" emerges and waiting for a bottoming rebound in the index is recommended, with key revenue realization phases expected around 2026-2027. In the long run, as the proportion of AI-related business revenue continues to increase, the valuation framework for the index is anticipated to shift from an "internet valuation" model to a "tech growth valuation" model.
Soochow Securities maintains that the Hong Kong stock market's prospects remain promising, with positive catalysts continuing to accumulate. Firstly, the spillover effect from the overseas tech rally could resonate with the Hong Kong market. The current overseas tech upswing is expanding from AI hardware to application software and mid-to-downstream segments. Previously, Hong Kong stocks underperformed compared to US, South Korean, and Japanese markets due to the lower market capitalization weight of AI hardware-related stocks, which limited their contribution to the index. If the US tech rally continues to spread to mid-to-downstream sectors, Hong Kong stocks, which have a significantly higher market weight in AI applications, software, and related infrastructure, could experience stronger rebound momentum.
Secondly, the rotation of market styles in China towards non-tech sectors has opened up valuation repair potential for Hong Kong's non-tech segments. The A-share market is undergoing a valuation rotation from semiconductor (core stocks) hardware to non-tech areas like consumer goods, real estate (core stocks), and infrastructure. The corresponding sectors in Hong Kong currently remain at relatively low valuations, offering attractive value and potential for synchronized gains.
Thirdly, while macro variable disturbances in June still require attention, overall risks appear manageable. Despite positive progress in the Strait of Hormuz agreement negotiations, June will require close monitoring of US inflation data and the initial interest rate meeting remarks from the new Federal Reserve Chair, Kevin Warsh. Overall, while geopolitical uncertainties persist, their suppressive effect on Hong Kong stocks is marginally diminishing.
Citic-Prudential Fund Management noted that the current focus on Hong Kong's tech assets is not driven by a single factor but results from the combined effect of fundamentals, liquidity, and valuation. From a fundamental perspective, the profitability of Hong Kong-listed companies may show signs of stabilization and improvement. Analyzing liquidity, as an offshore market, Hong Kong stocks are relatively sensitive to changes in global liquidity. The current monetary environment is favorable for emerging market assets. Furthermore, sustained net inflows of southbound capital have become a significant incremental funding source for the Hong Kong market, helping to improve market liquidity.
"From a valuation standpoint, Hong Kong assets still possess certain value advantages. Currently, the valuation of the Hong Kong Stock Connect Technology Theme Index shows a significant discount compared to the Nasdaq Index, suggesting potential for future revaluation."
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