Galaxy Securities: U.S. Non-Farm Payrolls Exceed Expectations, Where Are the Signals for Hong Kong Stocks to Break Through?

Guangzhou Securities has released a report stating that the U.S. non-farm data exceeded expectations, and in the short term, it is highly likely to elevate U.S. Treasury yields and reinforce expectations of high-interest rates, putting pressure on the valuation of Hong Kong stocks. However, this leans more towards being a market stress test rather than a confirmation signal for a trend reversal. Whether Hong Kong stocks can break through depends on whether their own liquidity and industrial logic can hedge against foreign interest rate disturbances. If Hong Kong stocks can maintain their momentum and rise significantly despite external bearish pressures, it would indicate that the reassessment of Chinese assets, the influx of southbound funds, and the technology industry cycle are becoming core drivers for Hong Kong stocks, potentially leading to a breakthrough; conversely, Hong Kong stocks are likely to enter a high-level consolidation phase. The core views of Guangzhou Securities are as follows: Performance of Hong Kong stocks: (1) This week (August 31 to September 4), a global risk-averse mode was activated, with significant internal divergence in Hong Kong stocks. Specifically, the Hang Seng Index increased by 0.26%, the Hang Seng Tech Index decreased by 0.77%, and the Hang Seng H-Share Index ETF increased by 0.76%. (2) Among the primary industries in Hong Kong stocks, two sectors showed an upward trend. Specifically, the financial sector rose by 4.62%, and the communications services sector rose by 0.44%; meanwhile, materials fell by 3.38%, industrials by 2.73%, information technology by 2.44%, healthcare by 2.07%, real estate by 2.04%, and consumer discretionary by 1.99%. Liquidity of Hong Kong stocks: (1) This week, the average daily turnover on the Hong Kong Stock Exchange was HKD 249.432 billion, a decrease of HKD 3.675 billion from the previous period. The average daily short selling amount this week was HKD 33.677 billion, an increase of HKD 1.222 billion; the average short selling amount accounted for 13.66% of the turnover, an increase of 0.90 percentage points. (2) This week, southbound funds had a cumulative net inflow of HKD 7.364 billion, a decrease of HKD 2.406 billion from the previous period. (3) As of September 2, over the past seven days, among Hong Kong stocks with Chinese capital, global actively managed foreign funds had a net inflow of USD 0.34 billion, while global passive foreign funds had a net outflow of USD 0.76 billion, an increase in net inflow of USD 0.46 billion and a decrease of USD 0.976 billion compared to last week. Valuation and risk appetite of Hong Kong stocks: (1) As of September 4, 2026, the PE and PB ratios of the Hang Seng Index were 11.3 times and 1.2 times, respectively, placing them at the 68% and 50% percentiles since 2010. (2) As of September 4, 2026, the 10-year U.S. Treasury yield rose by 5 basis points from last Friday to 4.78%, while the risk premium of the Hang Seng Index was 4.07%, which is -1.05 standard deviations from the 3-year rolling average, at the 6% percentile since 2010. With U.S. non-farm data exceeding expectations, where is the signal for Hong Kong stocks to "break through"? The U.S. non-farm data has exceeded expectations, and in the short term, it is highly likely to elevate U.S. Treasury yields and reinforce high-interest rate expectations, putting pressure on Hong Kong stock valuations. However, this leans more towards being a market stress test rather than a confirmation signal for a trend reversal. The key to whether Hong Kong stocks can break through lies in whether their liquidity and industrial logic can hedge against foreign interest rate disturbances. Three main signals should be focused on: first, whether southbound funds can re-establish a trend of sustained net inflows; second, whether the Hang Seng Tech Index can break through previous high points on increased volume; third, whether the AI market can expand from the previously leading sectors of computing power and PCB hardware to the realms of internet, AI applications, Agent, and Physical AI. If Hong Kong stocks can maintain their trend and rise significantly despite external bearish pressures, it suggests that the reassessment of Chinese assets, the influx of southbound funds, and the technology industry cycle are becoming the core drives for Hong Kong stocks, which may lead to a breakthrough; otherwise, Hong Kong stocks are likely to shift into a high-level consolidation phase. Investment strategies should focus on four main lines: (1) Technology sector. The current market discussion focuses on the most critical aspects of the AI supply chain, primarily on performance realization and application landing stages. Attention should be given to leading AI application companies and large model companies, especially those capable of translating AI technology into concrete business operations that generate revenue. Overall opportunities in the hardware sector may not be as strong as in the first half of the year, but leading hardware companies with genuine technological barriers that can continue to secure orders are still worth watching. (2) Pharmaceutical sector. Focus on innovative drugs and biotechnology, etc. (3) High dividend/yield assets. It is recommended to focus on banks, utilities, energy, etc. (4) Direction of mid-year performance certainty. It is recommended to focus on non-ferrous metals and certain consumer segments. Risk warnings: The domestic policy strength and effectiveness may not meet expectations; the risk of overseas interest rate cuts may fall short of expectations; risks related to market sentiment instability.