The Hong Kong stock market saw a significant uptrend from mid-September to early October, attracting widespread attention from investors. Taking the Hang Seng Index as an example, the index surged more than 34% from September 11th to October 7th, but experienced a decline of 8% in the following three trading days.<img src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/383/w1533h450/20241011/b757-4c1003d0921f7b67a5925a3b2a8716c6.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Hang Seng Index Trend Since September" original-src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/383/w1533h450/20241011/b757-4c1003d0921f7b67a5925a3b2a8716c6.png"/> Note: Hang Seng Index trend since SeptemberWhy did the Hong Kong stock market perform strongly before?As pointed out by Haitong Securities today, the initial trigger for this round of rise was the Fed's interest rate cut decision, which had a positive impact on the liquidity of the Hong Kong stock market. In addition, the strong performance of Hong Kong interim reports also provided core support for its rise.Since 2020, the Hong Kong stock market has been declining, with the Hang Seng Index recording four consecutive years of losses. Before the start of this trend, the Hang Seng Index had fallen by 41.3% from its peak on February 18, 2021. After a deep adjustment, the valuation of Hong Kong stocks gradually became more prominent, with valuations at relatively low levels compared historically and internationally.In early September, the expectation of a Fed rate cut became an important factor supporting the liquidity of Hong Kong stocks. On September 11th, the US Labor Department announced that August inflation data showed a continued easing of inflation, coupled with the previously released August employment data indicating a weakening job market, solidifying market expectations for the Fed to start cutting rates in September.With the landing of rate cut expectations, major developed economies overseas are expected to enter a rate-cutting cycle, and funds are expected to flow back into emerging markets. Considering the significant previous declines and low valuations of Chinese assets, the cost-effectiveness of Chinese assets is highlighted. Given the high degree of international participation in the Hong Kong stock market, with overseas investors accounting for as much as 40% of trading volume, Hong Kong stocks are more sensitive to changes in external liquidity, leading them to outperform A-shares in this round of rise.<img src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/739/w554h185/20241011/c10f-afb2d79ad1c259201d8879fa915263c0.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Hong Kong Stock Market Performance" original-src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/739/w554h185/20241011/c10f-afb2d79ad1c259201d8879fa915263c0.jpg"/>In addition to the improved liquidity environment, the relatively better performance of listed companies in Hong Kong is also a core driver of the stock market's rise. According to disclosed interim data for Hong Kong and A-shares, Hong Kong companies overall outperformed A-shares in terms of profitability. Looking at net profit growth rates, Hong Kong's net profit growth continued to rise in the first half of the year, while A-share profit growth declined. The strong performance laid the foundation for the rise of Hong Kong stocks, which may also be one of the reasons why Hong Kong stocks started to rise before A-shares in this round.<img src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/740/w554h186/20241011/061d-736dc417726fe95cab1c58fa02c5dec3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Hong Kong Stock Performance" original-src="https://imageproxy.pbkrs.com/https://n.sinaimg.cn/spider20241011/740/w554h186/20241011/061d-736dc417726fe95cab1c58fa02c5dec3.png"/>How to view the current pullback?Regarding the post-holiday pullback, CITIC Securities recently pointed out that firstly, after a short period of rapid rise, the Hong Kong stock market naturally experiences some pullback pressure, which is a self-adjusting mechanism of the market. Secondly, after active buying by foreign capital during the holiday period, there may have been some profit-taking operations, which also put pressure on the market. In addition, there may be certain expectations in the market for the news conference held on the first day after the holiday, but the final results may not fully meet market expectations, causing investors to worry about the certainty of policies, thereby affecting market sentiment.CITIC Securities stated that despite the brief pullback in the market, the positive factors previously discussed continue to influence the Hong Kong stock market. Furthermore, although the Hong Kong stock market has rebounded by over 40% from the year's low point, the rebound magnitude is far from historical extremes, indicating there is still significant room for further upside. From a valuation perspective, taking the Hang Seng Index as an example, although valuation levels have somewhat recovered, they have only returned to the vicinity of a reasonable range, suggesting it may be premature to talk about reaching a peak.Institutions suggest that the uptrend in the market seems to be not over yet.Guotai Junan Securities pointed out that the valuation cost-effectiveness of Hong Kong stocks, the Fed's interest rate cuts, strong interim performance of Hong Kong stocks, and the efforts of domestic macro policies have collectively supported the previous rise in Hong Kong stocks. Looking ahead, if positive factors at home and abroad continue to be validated, they may support further upward movement in Hong Kong stocks.CITIC Securities also shares a similar view: the uptrend in Hong Kong stocks seems to be not over yet, with potential for further upward movement in the future. It noted that although short-term market fluctuations are inevitable, from a long-term perspective, as market sentiment gradually stabilizes, investors will pay more attention to the fundamental situation of companies

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Hong Kong stocks experienced a significant increase from mid-September to early October, with the Hang Seng Index rising by over 34%, but then falling back by 8%. The reasons for the rise include the Fed's interest rate cut decision and strong performance in Hong Kong stock interim reports. The undervaluation of Hong Kong stocks has attracted investors' attention. Despite the short-term pullback, the market remains optimistic about the liquidity and performance of Hong Kong stocks

- The Hong Kong stock market experienced a significant rise from mid-September to early October, with the Hang Seng Index increasing over 34% before a subsequent decline of 8%.  
- The initial catalyst for this surge was the Federal Reserve's interest rate cut, which positively impacted market liquidity, alongside strong mid-year earnings reports from Hong Kong companies.  
- Despite a recent pullback, analysts suggest that the upward trend may continue if positive domestic and international factors persist, indicating that the market still has room for growth.

Is the Hong Kong stock market, which surged in September and corrected in October, an opportunity or a trap?