Latest Market Analysis: The Fed holds steady, market places greater emphasis on Capex ROI

1. Liquidity Perspective: As expected, the Fed held rates steady at its July meeting, dashing the market’s prior 40% expectation of a rate hike. Additionally, Waller’s remarks were generally dovish, causing the futures market to price in the probability of a September rate hike falling from 76% to 57%. From a global liquidity standpoint, Hong Kong risk assets stand to benefit from the diminished rate hike expectations.

2. Overseas Developments: Microsoft and Meta reported Q2 earnings and provided guidance on future Capex. Microsoft saw accelerated cloud business growth and exceeded expectations for Copilot paid seats on the applications side, while maintaining its full-year capital expenditure outlook—receiving positive market feedback. In contrast, Meta experienced declining Q2 margins, slightly raised its full-year Capex guidance, but lacks a clear ROI conversion path, resulting in negative market sentiment. Among major tech firms, there is only optimistic rhetoric about 2027 Capex without specific numerical guidance. Overall, market pricing reflects a clear preference: 'rewarding near-term monetization, rewarding cash flow, and penalizing long-term narratives.'

⚡ For the Hong Kong internet sector, liquidity concerns have temporarily eased, and the market may increasingly reward companies with robust cash flows and observable ROI. A high proportion of such companies are found within the Hong Kong internet sector, which also trades at low valuations—positioning them to continue benefiting. Recently, the sector has shown strong resilience, demonstrating notable downside protection amid heightened volatility in hardware-related sentiment. We believe the sector remains in the bottom reversal trend that began in late June, with reduced AI-related headwinds and multiple improvements in core businesses—making its future performance worth watching.

Data Source: Federal Reserve, Wells Fargo Asset Management (Hong Kong), data as of July 30, 2026.

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