Weekly Market Outlook – Weekly Market Strategy Report

Hong Kong Stock Market Analysis

Last week, the Hong Kong stock market showed volatile performance, with divergence across indices and sectors:

• Three major indices: Hang Seng Index edged down 0.88%, while the Hang Seng China Enterprises Index and Hang Seng Tech Index rose slightly by 0.13% and 0.09%, respectively.

• Strong-performing sectors: Information Technology (+2.07%), Consumer Discretionary (+0.97%), Energy (+0.04%).

• Weak sectors: Healthcare (-6.80%), Utilities (-3.90%), Real Estate & Construction (-3.30%).

• Fund flows: Southbound capital remains active, with net purchases reaching HK$22.821 billion for the week.

At the start of the week, tech stocks performed strongly, benefiting from the practical application of AI technologies and their potential for monetization. However, in the latter half of the week, the market was hit by two external headwinds: first, the U.S. plans to further tighten export controls on semiconductor equipment; second, strong U.S. employment data raised concerns that the Federal Reserve would maintain high interest rates, strengthening the U.S. dollar and putting pressure on liquidity in the Hong Kong stock market.

Hong Kong Market Outlook: Cooling expectations for rate cuts abroad; focus shifts to AI and resources sectors

I. Macro Environment: U.S. rates unlikely to fall; Mainland China adopting 'targeted stimulus'

United States (fading rate cut expectations): Nonfarm payrolls added 172,000 jobs in May, and both manufacturing and services PMIs exceeded expectations, reflecting strong resilience in the U.S. economy and labor market. With inflationary pressures persisting, the Fed needs to keep rates high, and market expectations for rate cuts this year have largely faded.

Mainland China (uneven recovery pace): May manufacturing data showed a slight slowdown in activity among large enterprises, but small and medium-sized as well as private enterprises remained resilient. The services sector saw a modest uptick, supported by the May Day holiday. Overall, the economy continues to expand at a moderate pace, and future policy is expected to focus on 'targeted and precise support,' with limited likelihood of broad-based, large-scale easing.

II. Sector Spotlight: China's AI Enters the 'Monetization' Phase

The focus of China's domestic AI industry has shifted from 'developing large models' to 'practical application and monetization.' Major tech firms are actively integrating AI features into their core social platforms to secure first-mover advantage, while leading AI startups continue to raise substantial funding rounds. Capital is flowing rapidly toward market leaders with proven monetization capabilities, potentially becoming a key driver for Hong Kong-listed tech stocks.

III. Market Outlook and Allocation Recommendations

Market Trend: Hong Kong equities remain capped by overseas liquidity conditions and the pace of China’s economic recovery. In the near term, the market is likely to stay range-bound with a 'volatile bottom-seeking' pattern, though downside risks are limited.

Allocation Recommendations: We recommend capturing structural opportunities during market volatility, with a focus on two key sectors:

1. Commodities and Energy Sector: A cyclical sector poised to benefit from the gradual recovery in industrial profits.

2. Growth sectors: Focus on companies whose valuations have already been significantly adjusted downward, which now offer renewed value and are backed by solid earnings.

IV. Key macro events to watch next week

Risk Warning:

This document is for informational purposes only and does not constitute an offer or solicitation to buy or sell any investment products, nor does it provide any advice or recommendations. The information contained herein has not taken into account your specific investment objectives, financial situation, or personal needs and should not be relied upon as a substitute for professional advice. You should seek independent professional advice before making any investment decision.

Investing involves risks, including the possible loss of principal. Past performance does not indicate future fund returns. The value of fund units may go up or down, and future returns are not guaranteed. Investors should read the fund's offering documents, including its prospectus and risk factors, prior to investing. You may obtain the Hong Kong offering documents for the fund at the following website: https://www.fullgoal.com.hk/en (the content of this website has not been reviewed by the Securities and Futures Commission).

This material is issued by Fullgoal Asset Management (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. Certain information in this document is sourced from third parties believed to be reliable; however, we make no representation or warranty as to its accuracy, completeness, or timeliness.

The above information is for reference only. If you intend to purchase relevant fund products, please pay attention to investor suitability management regulations, complete a risk assessment in advance, and purchase fund products with a risk rating that matches your own risk tolerance.

$HSI (LIST91331.HK)$$Nasdaq Composite Index (.IXIC.US)$$TENCENT (00700.HK)$$BABA-W (09988.HK)$$Z.AI (02513.HK)$$XIAOMI-W (01810.HK)$$MINIMAX-W (00100.HK)$$SMIC (00981.HK)$$ILUVATAR COREX (09903.HK)$$S&P 500 Index (.SPX.US)$$NVIDIA (NVDA.US)$$Fullgoal HangSeng HK High Dividend ETF (03031.HK)$

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