Looking ahead, the probability of the Hong Kong stock market continuing its volatile upward trend remains high. Currently, the valuation of Hong Kong stocks is still at a relatively low level compared to other major markets, providing a good safety margin. Although external liquidity constraints persist, with resilient U.S. inflation and rising Treasury yields continuing to pressure valuations of growth stocks, Hong Kong stocks have already largely reflected some pessimistic expectations in the past period, leaving relatively limited room for further significant declines. The main views are as follows:

Update on Hong Kong Stock Market Outlook: The probability of a volatile upward trend in the Hong Kong stock market remains high. The upward momentum primarily stems from three aspects. First, the moderate recovery in domestic price data has alleviated market concerns about price levels, creating potential for marginal upward revisions in corporate earnings expectations. Second, high-level interactions between China and the U.S. have reduced short-term geopolitical tail risks. If substantive progress is made in areas such as trade, energy, aviation, financial opening, and chip supply, it will further improve market risk appetite. Third, the AI industry trend remains clear, with capital expenditures, revenue guidance, and commercialization progress from leading companies like Alibaba and Tencent providing important valuation support for the technology sector.

Last Week's Market Performance in Hong Kong: Hong Kong stocks mostly declined last week, with the Hang Seng Index down 1.63% and the Hang Seng Tech Index down 3.17% among major indices. The AH premium dropped to 118.14. By sector, most major sectors in Hong Kong fell, with utilities and telecommunications rising, while materials led the declines.

Micro-Fund Flows: Last week, both Hong Kong capital and southbound capital recorded net inflows, while foreign capital saw net outflows: 1) Hong Kong-listed ETFs had a net inflow of HKD 2.293 billion, with a cumulative net inflow of HKD 48.795 billion year-to-date. 2) Using EPFR fund flows as a proxy, foreign capital had a net outflow of USD 1.90 billion last week, with a cumulative net outflow of USD 6.49 billion since the beginning of the year. 3) Southbound capital recorded a net inflow of HKD 9.3 billion, with its share of turnover rising to 22.4%. By sector, southbound capital mainly flowed into the financial and telecommunications industries last week.

Changes in Hong Kong Liquidity: Hong Kong market interest rates remained stable, with the overnight HIBOR at 2.43% and the 3-month HIBOR at 2.88%. The USD/HKD exchange rate was 7.83, gradually approaching the weak-side convertibility undertaking.

Key Overseas Liquidity Changes: Last week, the U.S. 2-year Treasury yield was 4.09% (up 19 bps); the 10-year Treasury yield was 4.59% (up 21 bps). The Secured Overnight Financing Rate (SOFR) was 3.58% (down 3 bps), while the SOFR-Interest on Reserve Balances (IORB) spread narrowed to -0.07% (down 3 bps), indicating a loosening liquidity trend.

Risk Warning: Economic data and policies may fall short of expectations; overseas policies may tighten more than anticipated.