Bank of East Asia senior investment strategist Chan Wai-chung assessed Hong Kong stocks' recent rally as temporary, following the Hang Seng Index's rise of over 800 points this week to close at 24,175 points. The strategist attributed the rebound to capital rotation from AI and semiconductor markets in Korea, Taiwan, and Japan into Hong Kong equities, particularly heavyweight tech stocks experiencing valuation recovery. Chan noted that near-term resistance exists at the 24,000 to 25,000-point range, with the rally expected to benefit Hong Kong stocks in the third quarter but remain short-lived due to stronger earnings growth prospects in other Asian markets.
Capital Rotation from Semiconductor Markets Drives Hong Kong Stocks Rally
Chan explained that capital in the first half of the year concentrated around AI themes, particularly upstream semiconductor markets in Korea, Taiwan, and Japan. Investors recently reduced positions in these markets, with Hong Kong stocks benefiting from sector rotation. The strategist noted that heavyweight tech stocks experienced valuation recovery, with Hong Kong stocks expected to benefit in the third quarter in the near term.
Strategist Identifies 24,000-25,000 Point Resistance Zone
Chan stated the current rebound will not sustain long-term, as market performance ultimately depends on earnings across different markets. Based on this year's earnings outlook, the strategist observed that markets in Japan, Korea, and Taiwan show higher profit growth than Hong Kong's heavyweight stocks. Short-term capital flows may support a Hong Kong stocks rebound, but the rally remains primarily temporary in nature.
Bank of East Asia Lowers Hang Seng Index Target to 27,100 Points
Bank of East Asia adjusted its Hang Seng Index target downward to 27,100 points last month. Regarding whether the index can break above 27,000 within the year, Chan indicated that the outcome depends on whether mainland policies increase easing measures and strengthen industry support. The strategist identified AI sector developments as a key factor, particularly whether large models, chips, and applications can enhance monetization capabilities.
FAQ
Why did Bank of East Asia's strategist call Hong Kong stocks' rebound temporary?
Chan Wai-chung stated the rebound will not sustain long-term because market performance ultimately depends on earnings across different markets. Based on this year's earnings outlook, Japan, Korea, and Taiwan markets show higher profit growth than Hong Kong's heavyweight stocks. Short-term capital flows may support the rally, but it remains primarily temporary in nature.
What conditions must be met for the Hang Seng Index to break above 27,000 points?
According to Chan, the index breaking above 27,000 depends on whether mainland policies increase easing measures and strengthen industry support. The strategist identified AI sector developments as key, particularly whether large models, chips, and applications can enhance monetization capabilities.
