On July 28, 2026, the Hong Kong stock market experienced a strong rebound. The Hang Seng Index closed up 1.8% at 21,032 points; the Hang Seng China Enterprises Index rose 2.1%; the Hang Seng Tech Index led with a 2.3% gain, closing at 4,856 points. Turnover expanded to HK$185 billion, with southbound capital net buying reaching as high as HK$8.25 billion, a three-month high. The tech sector became the vanguard of the rebound, with Tencent Holdings (00700) up 3.2%, Alibaba Group (09988) up 2.8%, Meituan (03690) up 4.1%, and Kuaishou Technology (01024) up 5.6%.
Multiple Positive Factors Coalesce, Market Risk Appetite Recovers
The rise in Hong Kong stocks was mainly driven by three factors. First, the People's Bank of China injected liquidity through open market operations this morning and signaled expectations of a reserve requirement ratio (RRR) cut, with the market anticipating a comprehensive 0.5 percentage point RRR cut in early August to support economic recovery. Second, there were signs of easing in China-US relations: the Office of the United States Trade Representative announced consultations on tariff exemptions for certain goods, which particularly boosted the tech sector. Third, global capital flowed back to emerging markets; the US Dollar Index weakened to 99.3, the CNY exchange rate stabilized, and Hong Kong stocks, as a valuation trough, attracted foreign capital allocation.
Southbound Capital Preference: Tech and Consumption Leaders
Today's southbound capital net buying list shows: Tencent Holdings net bought HK$1.26 billion, Meituan net bought HK$830 million, China Mobile (00941) net bought HK$670 million, and Xiaomi Group (01810) net bought HK$520 million. The tech sector accounted for 45% of total southbound capital inflows. Notably, the Southbound Stock Connect ETFs also continued to see inflows, with the China Asset Management Hang Seng Tech Index ETF (03088) receiving net subscriptions of HK$700 million in a single day. Analysts pointed out that southbound capital has been net buying for 13 consecutive trading days, accumulating over HK$60 billion, indicating increased confidence among mainland investors in Hong Kong stocks.
Tech Sector Valuation at Historical Lows, Room for Recovery Opens
The current price-to-earnings ratio (PE TTM) of the Hang Seng Tech Index is about 18 times, significantly below the five-year average of 25 times, and far below the Nasdaq 100 Index's 32 times. The price-to-book ratio (PB) is around 1.2 times, close to the 2019 low. At the individual stock level, Tencent Holdings' PE is only 15 times, Alibaba's PE is 12 times, both below the 10th percentile of their historical ranges. A strategy analyst from GF Securities (Hong Kong) said: Hong Kong tech stocks have fully priced in regulatory and macro risks, earnings growth expectations are recovering, and the valuation recovery has fundamental support. It is expected that the Hang Seng Tech Index will rebound to the 5500-6000 point range in the second half of the year.
Short-term Catalysts and Risk Points
In addition to the RRR cut expectation, Hong Kong stocks face several short-term catalysts. First, rumors of a dividend tax reform for Southbound Stock Connect have resurfaced; if implemented, it would enhance the appeal of high-dividend stocks. Second, Ant Group's restart of its IPO process has made progress, which may boost sentiment in the fintech sector. Third, the probability of a Fed rate cut in September has increased, benefiting global risk assets. However, risk points also need to be watched: if the domestic economic recovery is weaker than expected, or if the risk of US-China tech decoupling reignites, it could lead to market volatility. Investors should focus on whether the Hang Seng Index can firmly hold above 21,000 points and whether turnover can maintain above HK$150 billion.
Investment Strategy: Balanced Allocation, Focus on Earnings Certainty
In response to the current market, institutions recommend a balanced allocation strategy. In the tech sector, priority should be given to internet giants with strong earnings growth certainty and ample cash flow, such as Tencent, Meituan, and Xiaomi (with its automotive business gradually ramping up). In addition, high-dividend sectors like telecom and energy also offer defensive value, with China Mobile (0941) yielding nearly 7% and CNOOC Limited (0883) yielding about 6.5%, suitable for conservative investors. The chief Hong Kong stock strategist at Soochow Securities pointed out: "Hong Kong stocks are recovering from extreme pessimism, but a V-shaped reversal is unlikely; a stepwise rise is more probable. Buying tech leaders on dips while retaining some high-dividend positions is the optimal choice at present."
Outlook for the Future
Looking ahead to the second half of 2026, several international investment banks have upgraded their ratings for Hong Kong stocks. Morgan Stanley raised its year-end target for the Hang Seng Index to 22,500 points, citing the start of China's policy easing cycle and bottoming out of corporate earnings. Goldman Sachs pointed out that the return of southbound capital and foreign capital will form a resonance, and the valuation recovery of the tech sector is likely to continue. Investors can focus on the August interim reporting season; if leading companies' results beat expectations, it will further catalyze the market. Overall, Hong Kong stocks have entered a mid-term window for positioning, but attention should be paid to exchange rate fluctuations and short-term disruptions caused by changes in the external environment.
ThaiREIT reminds: Cross-border investment requires consideration of exchange rate risk and market volatility. The above analysis is for reference only and does not constitute investment advice.
