Galaxy Securities expects the trading activity of Hong Kong stocks to continue to rise, focusing on the technology and consumer sectors

China Galaxy Securities published a strategy report stating that Hong Kong stocks rose 2.01% last week (from December 29, 2025, to January 2, 2026), with the Hang Seng TECH Index increasing by 4.31%. In terms of industry sectors, among the primary industries, 7 sectors rose and 4 sectors fell last week. Specifically, the indices for information technology, energy, and materials rose by 4.54%, 3.97%, and 2.98%, respectively; while the indices for consumer staples, utilities, and healthcare saw the largest declines, falling by 2.25%, 1.6%, and 0.59%, respectively. From the perspective of secondary industries, last week, the semiconductor, defense and military, oil and petrochemical, software services, and paper and packaging sectors had the largest gains, while household products, durable consumer goods, consumer services, retail of daily consumer goods, and textiles and apparel sectors experienced the largest declines.

Last week’s liquidity in Hong Kong stocks: (1) The average daily trading volume on the Hong Kong Stock Exchange was HKD 171.19 billion, an increase of HKD 31.264 billion from the previous week. The average daily short-selling amount was HKD 19.927 billion, an increase of HKD 2.961 billion from last week; the average ratio of short-selling amount to trading volume was 11.78%, a decrease of 0.22 percentage points from last week. (2) Last week, the cumulative net outflow of southbound funds was HKD 3.81 billion, a decrease of HKD 6.371 billion from the previous week’s net inflow.

Regarding Hong Kong stock valuations and risk appetite: (1) As of January 2, 2026, the price-to-earnings ratio and price-to-book ratio of the Hang Seng Index were 12.09 times and 1.23 times, respectively, both up 2.36% from last Friday, placing them at the 79% and 56% percentile levels since 2010. The price-to-earnings ratio and price-to-book ratio of the Hang Seng TECH Index were 23.8 times and 3.15 times, respectively, placing them at the 36% and 66% percentile levels since 2010.

(2) The yield on 10-year U.S. Treasury bonds rose by 5 basis points to 4.19% compared to last Friday, while the risk premium of the Hang Seng Index was 4.08%, which is 1.82 standard deviations below the 3-year rolling average, placing it at the 4% percentile since 2010. The yield on 10-year Chinese government bonds rose by 0.97 basis points to 1.8473% compared to last Friday, resulting in a risk premium of 6.42% for the Hang Seng Index, which is 1.71 standard deviations below the mean (3-year rolling), placing it at the 40% percentile since 2010. (3) The AH premium index for the Shanghai-Hong Kong Stock Connect decreased by 2.26 points to 120.89 compared to last Friday, placing it at the 19% percentile level since 2014.

China Galaxy Securities stated that looking ahead, with multiple positive factors resonating, the trading activity in the Hong Kong stock market is expected to continue to rise, and the overall trend of Hong Kong stocks is anticipated to be upward with fluctuations. In terms of allocation, it is recommended to focus on the following sectors: (1) The technology sector remains the main line for medium to long-term investment, expected to rise with fluctuations under the resonance of multiple favorable factors such as price increases in the industrial chain, mergers and acquisitions, and domestic substitution. (2) The consumer sector is expected to continue benefiting from policy support, and current valuations are at relatively low levels, indicating significant medium to long-term upside potential. Future attention should be paid to the implementation of policies and improvements in consumer data