Galaxy Securities: Hong Kong stocks are likely to maintain a pattern of fluctuation and differentiation. Pay attention to three main themes.

Galaxy Securities released a research report stating that the Hong Kong stock market is currently in a triple window period of geopolitical risk fluctuations, financial performance verification during earnings season, and fund differentiation. Overall, the market is likely to maintain a volatile and differentiated pattern, making it difficult to see a trending market. Investment strategies should shift from the past "buying the dip" approach to "profit from structure." Investors should focus on three main themes: cyclical sectors, finance and optional consumption, and the technology sector. Firstly, in cyclical sectors, focus on safe-haven assets such as gold, energy, and tightening supply of chemicals (such as methanol, polyethylene), while temporarily avoiding military and critical metals with fluctuating volatility. Secondly, in finance and optional consumption, the finance sector (banks, insurance) has historically low valuations (PB ratio of about 0.6 times), a dividend yield of over 4%, and ample safety margin, making it suitable as a core holding but should not be chased at high levels. In optional consumption, it is recommended to select strong export-driven and already verified performance companies in the automotive industry chain, while avoiding stocks with profit warnings or slowing growth. Thirdly, in the technology sector, prioritize companies in the AI application sector (such as digital economy) with high commercialization and realized performance. Companies like NETDRAGON in the internet sector have received inflows of Southbound funds against the trend and can be considered as a defensive core holding. Upstream hardware such as semiconductors are facing excessive capital spending, profit concerns, and geopolitical risks, so it is advisable to temporarily delay positioning and wait for a clear turning point. Last week's performance of the Hong Kong stock market: (1) Last week (March 30 to April 3), the Hang Seng Index rose by 0.66%, the Hang Seng Tech Index fell by 2.07%, and the Hang Seng H-Share Index ETF rose by 0.04%. (2) Among the primary industries in the Hong Kong stock market, six industries rose last week, while five industries declined. Among them, healthcare rose by 6.77%, materials by 3.01%, and finance by 2.37%; energy fell by 3.48%, information technology by 1.02%, and utilities by 0.98%. Looking at the secondary industries, last week the top gainers were pharmaceuticals bio, non-ferrous metals, banks, food and beverages, and automotive and parts, while the top losers were durable consumer goods, coal II, paper and packaging, oil and petrochemicals, and semiconductors. Last week's liquidity in the Hong Kong stock market: (1) The average daily turnover on the Hong Kong Stock Exchange last week was 269.207 billion Hong Kong dollars, a decrease of 40.398 billion Hong Kong dollars from the previous week. (2) Last week, the cumulative net inflow of Southbound funds was 5.371 billion Hong Kong dollars, a decrease of 19.775 billion Hong Kong dollars from the previous week. (3) In the past seven days as of April 1, among mainland Chinese stocks in the Hong Kong stock market, global active foreign funds had a net outflow of 0.9 million USD, while global passive foreign funds had a net outflow of 7.61 million USD, an increase of 1.88 million USD and a decrease of 13.69 million USD respectively compared to the previous week. Valuation and risk preference in the Hong Kong stock market: (1) As of April 2, 2026, the Hang Seng Index's PE and PB were 12.31 times and 1.24 times, respectively, at the 80% and 57% percentile levels since 2010. (2) The 10-year US Treasury yield fell by 13 basis points to 4.31% last week, the risk premium of the Hang Seng Index was 3.82%, at -1.68 times the standard deviation of the 3-year rolling average since 2010, at the 3% percentile. (3) The Hang Seng Shanghai-Hong Kong Stock Connect AH premium index dropped by 1.29 points to 119.19 last Friday, at the 14.94% percentile level since 2014. Short-term US-Iran conflict: The current US-Iran conflict is unlikely to have a clear end in April and the entire second quarter. The oil tanker traffic in the Strait of Hormuz has decreased to around 3% of normal levels, and oil prices are fluctuating in the range of $90 to $110 per barrel, becoming the benchmark scenario. The market has already priced in the "inflation shock," but concerns about the "growth shock" - high oil prices may suppress global demand - may become the next risk to watch out for. Against this backdrop, the Hong Kong stock market is currently in a triple window period of geopolitical risk fluctuations, financial performance verification during earnings season, and fund differentiation. Overall, the market is likely to maintain a volatile and differentiated pattern, making it difficult to see a trending market. Investment strategies should shift from the past "buying the dip" approach to "profit from structure."