Xingzheng Zhang Yi Dong: Under the influence of incremental capital, the "A-shares-ization" of Hong Kong stock investment may become a trend.

Industrial Zhang Yidong released a research report stating that after the storm comes the rainbow in the second half of 2025, and the Hong Kong stock market will fluctuate upwards. In the first stage, before fully digesting the impact of tariffs on the Chinese economy, the Hong Kong stock market may maintain a pattern of "bottom lifting big box volatility". In the second stage, after fully digesting the impact of tariffs on the Chinese economy, with the effects of Chinese economic policies becoming apparent, the Hong Kong stock market is expected to see improvements in fundamentals and risk appetite, embarking on a journey to new highs. Industrial believes that under the influence of incremental capital, the "A-shareization" of Hong Kong stocks may be a trend. Among them, "military industry + technology + new consumption + new stocks" are spears, and "gold + dividends" are shields. In terms of technology and new consumption, growth investment needs to differentiate between trends and noise, real growth and themes. Technology and new consumption are the two main growth themes currently. The period from April to September 2025 will be the peak period for the lifting of restricted shares. For true growth stocks, the adjustment brought about by lifting and reducing holdings is noise, and is actually a good buying opportunity. Regarding the US stock market, Industrial points out that in the second and third quarters of 2025, the US economy may have difficulty avoiding a downturn. The US economy in 2025 may have already entered a downturn cycle. US inflation remains sticky at a high level, and the "equivalent tariff" policy will further hinder the downward trend of inflation. The yield on US bonds may be difficult to decrease significantly in the second half of the year. The US stock market may face a double kill in valuations and profits in the second half of the year, and global funds will flow towards high-quality assets that have low correlation with the US stock market. The risk premium of US stocks has not fully priced in the long-term uncertainty of US assets. Industrial's main points are as follows: 1. In the midst of the reconstruction of the international order, asset allocation may present three major opportunities. Drawing from history, the asset allocation during the turbulent period of the international order in the 1970s. The deepening of the great power game in the 70s, the collapse of the Bretton Woods system, the failure of the Vietnam War, and the oil crisis marked the beginning of a turbulent and reconstructive phase in the international political and economic order. The 70s saw the emergence of a super bull market in gold, the US dollar entering a decade-long devaluation cycle, and US and European stock markets experiencing a decade of stagflation-induced "non-bull market" fluctuations. In contrast, the Japanese stock market far outperformed the US market. The current international order is once again entering a turbulent period, where uncertainty will become the norm. The "equivalent tariff" war provoked by the Trump administration essentially shifts the internal debt risks and social contradictions that are difficult to solve outward. In the long term, the international order dominated by the US in the past 30 years is being undermined by the US itself, and the US dollar credit system will face deep challenges. During the turbulent period of the international order, three major allocation opportunities arise in response to "uncertainty". 1) Assets such as gold, military industries, and digital assets are strategic assets in the turbulent period of the international order. 2) Opportunities related to technological innovation will be key to building a new global economic order that is "inclusive and beneficial". 3) In the context of rebalancing country-specific asset allocations, there are opportunities for the revaluation of Chinese assets. 2. The outlook for the US stock market in the second half of 2025 is bleak, but not necessarily negative for China. Prospects for the US economy in the second half of the year: The second and third quarters of 2025 may be challenging for the US economy. The US economy in 2025 may already be entering a downturn cycle. US inflation remains sticky at a high level, and the "equivalent tariff" policy will further impede a downward trend in inflation. The policies of the Trump administration are filled with strong uncertainty, which could still lead to twists and turns in global trade negotiations, ultimately affecting the confidence of American entrepreneurs and consumers. The yield on US bonds may not experience a significant decrease in the second half of the year. The Federal Reserve needs to make trade-offs between "controlling inflation" and "supporting economic growth", and the Fed's attitude towards rate cuts may be more cautious than market expectations. Considering that US inflation in the second and third quarters still has a high level of stickiness, there may not be much room for a significant decrease in the yield of 10-year US bonds. The US stock market may face a double blow to valuations and profits in the second half of the year, and global funds will flow towards high-quality assets that have low correlation with the US stock market. The risk premium of US stocks has not fully priced in the long-term uncertainty of US assets. 3. China's capital market has great potential, with stable indices and structural strength. In the "stable East and turbulent West" international environment, the Chinese stock market will benefit from the new global economic order. Since 2025, the overseas political and economic situation has become more turbulent and uncertain, with China becoming a stable anchor for world economic growth. China is coordinating its domestic economic work and international economic and trade struggles, responding to the rapid changes in the external environment with the certainty of high-quality development. Expectations for the Chinese stock market and economy are mutually reinforcing, with domestic and foreign investors gradually gaining more confidence in the Chinese economy and stock market. Key structural highlights of the revaluation of Chinese assets - technology and new consumption. 1) New consumption - service consumption, spiritual consumption, AI consumption, etc. Chinese policies are focusing on the supply of service consumption and supporting the development of new consumption. There is still great potential in the field of service consumption, and China is at the beginning of the "spiritual consumption era." High-quality companies in the new consumption sector have strong growth attributes. 2) The collective breakthrough in technological innovation has boosted the confidence of the Chinese people, particularly in the national spirit. After years of accumulation, relying on China's strong manufacturing capabilities and solid basic education, Chinese technology companies such as DeepSeek, Siasun Robot & Automation, sixth-generation machines, and innovative medicines have emerged, demonstrating China's strong comprehensive competitiveness. 4. A new era for Hong Kong stocks: the reconstruction of the international order illuminates the "Pearl of the East"; the revaluation of Chinese assets drives the long bull market of Hong Kong stocks. There has been a fundamental change in the deep logic of the Hong Kong stock market - the central government firmly consolidates and enhances Hong Kong's position as an international financial center. There has been a change in the ecosystem of the Hong Kong stock market - it has seen a wave of high-quality companies listing, with incremental funds from both domestic and overseas markets continuing to flow into the Hong Kong stock market. 1) Since 2023, the People's Bank of China, China Securities Regulatory Commission, and other departments have successively introduced multiple policies to help companies list in Hong Kong, and the HKEX's institutional reforms, represented by FINI, have significantly increased the ability of the Hong Kong market to absorb Chinese assets. 2) The wave of high-quality companies from the new consumption and technology industries listing in Hong Kong has injected fresh blood into the Hong Kong stock market. The current bull market of Hong Kong stocks will continue to benefit from the revaluation of Chinese assets. The tree of technology and new consumption will surely attract global investment like a Golden Phoenix. 1) Drawing from history, Hong Kong can leverage its advantages as an international financial center, attract global investors with its high-quality assets, drive the revaluation of Chinese assets, and even lead to a major bull market.1) In 2020, new high-quality assets in the new economy have emerged with independent market trends. 2) Compared globally, the Hong Kong stock market now has many growth-oriented consumer companies as well as technology and advanced manufacturing enterprises represented by artificial intelligence and Siasun Robot & Automation, with a high cost performance ratio.Investment Strategy: strategically bullish on Hong Kong stocks in the new era, tactically stable and aggressive Market Outlook: After the storm in the second half of 2025, we will see a rainbow, and Hong Kong stocks will fluctuate upwards. 1) In the first stage, before China's economy fully absorbs the impact of tariffs, Hong Kong stocks may maintain the pattern of "bottom-up large box oscillations". Substantial progress in China-US trade negotiations, but Trump's tariff policy has had and will continue to have an impact on the US, China, and the global economy, and the international economic and trade order will not return to before April 2, 2025. 2) In the second stage, after China's economy fully absorbs the impact of tariffs, as the effects of China's economic policies become evident, the Hong Kong stock market is expected to see improvements in fundamentals and risk preferences, embarking on a journey to new highs. Investment Style: With the influence of incremental funds, the trend of "A-shareification" of Hong Kong stocks may become a trend. 1) Incremental fund analysis: Domestic funds are gradually becoming the backbone of the Hong Kong stock market. Active domestic funds are an important incremental DRIVE in the Hong Kong stock market in 2025, with A-share investment strategies such as thematic investments, new stock chasing, and speculation in small and medium-cap stocks spreading to Hong Kong stocks, increasing market transaction activity. In a low-interest rate environment, long-term investment funds such as insurance funds remain important forces for buying Hong Kong stocks. 2) "A-shareification of Hong Kong stocks" will affect the investment opportunities and investment pace of Hong Kong stocks. Firstly, it breaks the dull environment of "no dreams for Hong Kong stocks", and investors' tolerance for the valuation of growth assets increases. Funds are no longer only focused on first-tier leading stocks with high certainty, but also spread to second-tier leading and mid-cap stocks. Secondly, market game intensity strengthens, and as Hong Kong stocks are an efficient and convenient market for refinancing and short selling, thematic investments need to pay attention to the impact of chip structure and market risk preferences on stock prices. Investment Opportunities: Prepared for offense and defense, "Defense Industry + Technology + New Consumption + New Stocks" are the spear, "Gold + Dividends" are the shield. 1) Technology & New Consumption: Growth investment requires distinguishing trends from noise, and differentiating genuine growth from themes. Technology and new consumption are the two main growth themes currently. The period from April to September 2025 will be the peak period for the lifting of restricted shares. For true growth stocks, the adjustments brought about by lifting and reductions are noise, and this is a good buying opportunity. - Investment clues for technology: First, AI is driving downstream application growth, opening up commercial space for B-end SAAS ecosystems, and favoring domestic internet giants in the super traffic competition on the C-end. Second, investment opportunities in the intelligent assisted driving industry chain. Third, Siasun Robot & Automation. Fourth, innovative drugs. - Investment clues for new consumption: Trendy gaming, gold jewelry, urban outdoor, new catering, domestic beauty care, trendy discount retail, OTA, games, etc. 2) Gold & Defense Industry: Strategic assets in the era of restructuring global order. 3) Opportunities for new shares & second-tier shares: The wave of emerging growth technology companies, new consumer brand, and advanced manufacturing companies listing in Hong Kong is gaining momentum. 4) Dividend stocks: Dividend yield remains attractive to allocation-type funds. Risk Warning: Risks of major power games, risks of US monetary policy exceeding expectations, risks of global economic growth slowing more than expected.