Weekly Market Outlook – Weekly Market Strategy Report

Weekly Market Review: The broader market oscillated and consolidated, with capital flows leaning towards defensive positions

Over the past week, Hong Kong stocks overall exhibited a volatile pullback trend. The performance of major indices is as follows:

Hang Seng Index: down 2.15%

Hang Seng Tech Index: down 3.10%

Hang Seng China Enterprises Index: down 2.24%

Sector performance diverged: As risk-averse sentiment in the market intensified, defensive sectors outperformed against the trend, among whichConsumer Staples (+1.01%), Energy Sector (+0.92%)andUtilities (+0.69%)showed relatively resilient performance; while sectors that had seen significant gains earlier,Raw Materials Sector (-5.79%)andand Information Technology Sector (-4.44%) experienced more pronounced profit-taking.

Fund Flow: The pace of capital inflows via the Southbound "Stock Connect" has slowed, with cumulative net buying of approximately HK$89 million for the week, indicating that mainland investors are adopting a more cautious and wait-and-see stance in the short term.

Overseas Macro Environment: US inflation cools, pressure for further rate hikes continues to ease

Inflation retreats as expected: The US Consumer Price Index (CPI) rose 3.4% year-on-year in July, while core CPI increased 2.5% year-on-year. The data met market expectations, reflecting that overall price pressures are moderating and under control.

Consumer momentum slows: Retail sales fell 0.6% month-on-month in July, missing market expectations, which reflects a weakening in local consumer sentiment.

Interest rate expectations cool: With the labor market cooling and inflation under control, market concerns about the Federal Reserve restarting rate hikes in the near term have significantly subsided. Reduced pressure on overseas funding costs is beneficial in the long run for providing bottom-line support to HK stock valuations.

Focus Analysis: Market attention shifts to "corporate earnings reports"

HK stocks are currently enteringPeak season for interim report (half-year results) releases, the market's pricing logic is undergoing a significant shift:

from "sentiment-driven" to "fundamentals-driven": The earlier rally was mainly driven by improved market sentiment and liquidity; currently, capital is more pragmatic, focusing on examining companies'earnings qualityandand the sustainability of future growth。

Stricter scrutiny on tech leaders: Investors are no longer satisfied with merely meeting short-term earnings targets, but are paying closer attention to revenue growth momentum and free cash flow status, with decreased tolerance for models characterized by "high investment and slow returns."

Medium-to-long-term industry highlights remain：

in the commercial implementation of AIDomestic large language models are being upgraded sequentially, with adjustments to service pricing. Industry competition is gradually shifting from a "price war" to healthy "monetization," which bodes well for the sector's long-term profitability outlook.

Optimization of index structureThe Hang Seng Tech Index is currently consulting on expanding its constituent base (proposed increase from 30 to 50 stocks) and refining inclusion criteria. This move is expected to attract more high-quality hard-tech companies, thereby enhancing the index's representativeness.

Investment Allocation Advice: Focus on Four Balanced Themes

In the face of short-term market volatility, investors are advised to adopt a balanced allocation strategy that combines "steady defense with growth themes":

High-dividend defensive assets (core holdings)：

Key SectorsLarge-cap financial stocks, utility stocks.

Strategic RationaleCharacterized by stable cash flows and strong dividend-paying capabilities, helping to reduce portfolio volatility.

High-quality non-ferrous metal resources：

Key Focus Areas: Leaders in resource sectors such as gold, copper, and aluminum.

Strategic Rationale: Benefiting from easing overseas interest rate pressures, tight global supply, and substantial demand driven by new energy and AI computing infrastructure.

Innovative pharmaceutical companies with improving fundamentals：

Key Focus Areas: Leading pharmaceutical companies with strong independent R&D capabilities and successful expansion into overseas markets.

Strategic Rationale: R&D achievements are gradually translating into revenue, offering room for mid-term valuation repair in the sector.

AI technology supply chain with proven order fulfillment capabilities：

Key Focus Areas: Leading companies in computing hardware and large platform enterprises with diverse application scenarios.

Strategic Rationale: The trend toward AI commercialization is highly certain. Priority is given to industry leaders with high technical barriers and clear business growth paths.

V. 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.

Investment involves risks, including the potential loss of principal. Past performance does not indicate future fund returns. The value of fund units may rise or fall, and future returns are not guaranteed. Investors should read the fund's offering documents, including its prospectus and risk factors, before investing. Relevant fund information is available at https://www.fullgoal.com.hk/en (the content of this website has not been reviewed by the SFC).

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 wish to purchase relevant fund products, please pay attention to investor suitability management regulations, complete a risk assessment in advance, and select fund products with a risk rating that matches your own risk tolerance.

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