Hong Kong stocks are heading towards the "AI Bull"! The Tech Index soared and once stood above the 6,000-point mark, how much more room is there for this round of rise?

Hong Kong stocks completely exploded.

Today, Hong Kong stocks continued to rise throughout the day, $Hang Seng Index (800000.HK)$ 、 $Hang Seng TECH Index (800700.HK)$ setting new highs in this phase.Both rose by 3.27% and 4.47% respectively, with the Hang Seng Index climbing 750 points.Market bullish sentiment has reignited.

The Financial Secretary for the Hong Kong SAR, Paul Chan, stated today that efforts will continue to enhance offshore RMB liquidity, improve related infrastructure, and provide more investment products and risk management tools. The Hong Kong SAR government will optimize the connectivity mechanism with the mainland, including launching offshore government bond Futures in Hong Kong.

It is worth noting that since January 14, the Hang Seng Index has accumulated a rise of over 26%, while the Hang Seng TECH Index has surged by as much as 41%.

Technology stocks are on fire, becoming the core driving force of the market.Today, $MEITUAN-W (03690.HK)$ Soaring nearly 10%, $JD-SW (09618.HK)$ up more than 8%, $SMIC (00981.HK)$ 、 $XIAOMI-W (01810.HK)$ Both have risen over 5% and set new historical highs. $BABA-W (09988.HK)$ Rising nearly 5%.

In addition,Today, Brokerage stocks, Mainland Real Estate stocks, Dining stocks, etc., have been violently boosted in succession. $NAYUKI (02150.HK)$ Increased over 33%. $SHIMAO GROUP (00813.HK)$ Increased nearly 26%. $CICC (03908.HK)$ 、 $CGS (06881.HK)$ Increased by over 19% and 17% respectively.

According to market news, it is reported that China Galaxy and China International Capital Corporation plan to merge through a stock swap, which is expected to be announced in the coming weeks. In response, both parties' PR departments stated that they were unaware. This rumor has already surfaced multiple times in 2024 but was denied by both companies.

Looking at this year's increase, Technology stocks are the main force in this bull market, among the Hang Seng TECH Index component stocks. $SMIC (00981.HK)$ Increased by over 80%, $HUA HONG SEMI (01347.HK)$ Increased by over 78%, $XPENG-W (09868.HK)$ Increased by over 75%, $BABA-W (09988.HK)$ Increased by over 66%, $ALI HEALTH (00241.HK)$ 、 $XIAOMI-W (01810.HK)$ Increased by over 63%.

Southbound funds and foreign capital are entering the market in large quantities.

Since the beginning of this year, the enthusiasm of southbound funds for Hong Kong stocks has continued to rise.

Wind data shows,From early 2025 to now, the cumulative net buying scale has reached approximately 250 billion yuan.Only 5 trading days had net outflows.

As of today, southbound funds have recorded net purchases of over 10 billion Hong Kong dollars for 4 consecutive days, with yesterday seeing a surge of over 22 billion Hong Kong dollars in Hong Kong stocks, marking the third highest in history and the second highest this year.

According to statistical data, Alibaba and Tencent have become the "favorites" of southbound funds, with cumulative net inflows this year reaching 48.4 billion and 40.3 billion Hong Kong dollars respectively, showing that mainland investors favor these two Internet giants.

Morgan Stanley Fund predicts that the Hong Kong stocks have shown significant growth this year, driven by inflows from Mainland money and foreign capital.

On one hand, this year, Mainland funds have continuously flowed into Hong Kong stocks, while on the other hand, overseas funds are rebalancing global asset allocation, returning from other Emerging Markets to Hong Kong stocks.

According to data, from January 24 to February 14,foreign capital net inflow into Hong Kong stocks was 17.7 billion Hong Kong dollars, mainly increasing positions in the Technology and Consumer Sectors.

Market analysis indicates that the weakening data on consumer confidence in the USA, service sector PMI, and Walmart's weak performancemay accelerate the shift of funds from the overvalued US stocks to the undervalued Hong Kong stocks.

How much room is there for revaluation of the Technology sector in Hong Kong stocks?

This year, the continuous surge of Hong Kong stocks has also made it one of the best stock markets in the world.

The market performance of Hong Kong stocks, especially in the Internet and Technology sectors, has become the focus, and Changjiang Securities looks at the future valuation from two perspectives regarding how much room there is for growth.

Firstly, the firm envisions the space for the re-evaluation of China's technology valuations by benchmarking against US tech leaders, theoretically indicating that there is still considerable room for recovery in Hong Kong tech stocks.

The firm compares valuations using different metrics such as PE, PS, and PEG.

1) As of February 21, 2025, the average PE-TTM, PS-TTM, and PEG of the top ten AI-related stocks in the US market by market cap are lower than those of the top ten AI-related stocks in China A-shares by market cap (hereinafter referred to as major A-share AI stocks). The average PE-TTM of major A-share AI stocks is 83.22x, which is 24.49% away from the average PE-TTM of major US AI stocks; the average PS-TTM of major A-share AI stocks is 33.41% away from major US AI stocks; and the average PEG of major A-share AI stocks is 1.28% away from major US AI stocks. 2) Hong Kong stocks and Chinese concept stocks are significantly lower than US stocks, where the PE-TTM (31.92x) and PS-TTM (3.13x) of the top ten AI-related stocks by market cap in Hong Kong shows a theoretical upside potential of 96.8% and 286.3% respectively, while the PEG gap is 35.2%. The firm believes that a crucial condition for Hong Kong tech stocks to align with the valuation system of leading US stocks is that the AI market transitions from overseas influences to domestic industry prosperity, which is gradually being validated. The recent significant inflow of foreign capital into Hong Kong tech stocks indicates that, to some extent, foreign capital is starting to recognize this logic.

Secondly, referring to the historically high valuation levels of Hong Kong Internet stocks, the focus is on whether Hong Kong tech can replicate the bull market of 2020-2021.。

The firm reflects on history, noting that from the end of 2020 to the beginning of 2021, Hong Kong stocks led the global bull market due to the rise of tech-weighted stocks. In 2021, the valuation of the Hang Seng Index reached nearly a decade high, while the PE and PS ratios of the Hang Seng Technology also peaked, primarily driven by global liquidity easing, expectations of China's economic recovery, and performance recovery in sectors like the Internet.

1) Global liquidity easing: Central banks such as the Federal Reserve maintain ultra-low interest rates and engage in large-scale bond purchases, leading to capital inflow into Hong Kong stocks and other Emerging Markets. 2) Expectations of China’s economic recovery: Under policy support, corporate earnings gradually improve, boosting market confidence. 3) Performance recovery in sectors like the Internet: Increased demand for Internet products due to remote working results in performance recovery in those sectors, along with the ongoing dividends from the Internet, driving the valuation increase of the Hong Kong stock index.

Changjiang Securities believes that, Against the backdrop of the explosion of the "AI+" industry chain, the Hong Kong stock market is transitioning from a "Dividend Bull" to an "AI Bull."In the past three years, the valuations of Hong Kong technology and Internet companies have been significantly impacted by the macro environment,

On one hand, as the technology and Internet sectors mature, their performance fluctuates with domestic economic expectations, transforming from growth stocks to value stocks, while their valuation center continues to decline; on the other hand, the overall valuation of Hong Kong stocks is influenced by short-term overseas liquidity, as high U.S. Treasury rates and a strong dollar suppress the performance of Hong Kong stocks, hence companies with stable cash flows and dividends are more favored by investors.

With the changing dynamics of AI, Hong Kong technology companies that possess numerous AI applications and underlying technologies may experience a "second spring" in their industry lifecycle, transitioning from value stocks back into growth stocks. While the realization of performance may take some time, the revaluation has already begun.

What should be the focus going forward?

Looking ahead, according to reports from China Merchants Securities, the two sessions will soon commence. In the short term, China Merchants Securities stated that based on past experience, the market generally rises before the two sessions, with slightly weaker performance during the meetings and the following week, especially for large-cap stocks, but the market strengthens again two weeks later, with major indexes generally rising a month after the meetings.Industries with strong growth attributes, such as Technology, have a high probability of achieving excess returns after the Two Sessions, while traditional sectors perform poorly.

Hualong Securities believes that The expectations for policy easing are strong, the fundamental expectations will further improve, and policies will guide medium to long-term funds into the market. Recently, the Volume has also obviously rebounded, which will overall stabilize market expectations. The recent stage adjustment may present a good opportunity for future allocations.Based on the rise and fall patterns of the first five trading days before each Two Sessions and recent market hotspots, the focus mainly remains on the new quality productive forces.

In addition, the Financial Secretary of the Hong Kong Special Administrative Region, Paul Chan, today announced the government's fiscal budget for 2025 to 2026.

Paul Chan stated that in order to promote more stocks to be traded in Renminbi and enhance market liquidity, The two regions are currently making full-speed technical preparations to implement Renminbi trading counters into the Hong Kong Stock Connect.

Morgan Stanley stated that the Chinese stock market, particularly the offshore market, is undergoing a structural transformation that will bring sustainable ROE and valuation recovery. CITIC SEC believes that the reversal of the Hong Kong stock market trend is likely to continue.

Hong Kong stocks continue to soar, making good use of the "Monthly Contribution Zone" function to invest in a timed and fixed amount, using the average cost method to capture the increase!

1.1M Views