Hang Seng Index Rallies for Fifth Day, Reclaims 18,000 Mark; Southbound Capital Inflows Exceed HK$10 Billion - Can the Rally Persist?

The Hong Kong stock market has recently experienced a strong rebound, with the Hang Seng Index rising for five consecutive trading days and reclaiming the 18,000-point mark. Meanwhile, southbound capital net purchases exceeded HK$10 billion in a single day, hitting a recent high. Market sentiment has clearly warmed, and investor risk appetite has improved, driving large-cap blue chips and technology sectors to alternate in strength.

Hang Seng Index Rallies for Fifth Day, Reclaims 18,000 Mark

As of today's close, the Hang Seng Index closed above 18,000 points, marking its fifth consecutive daily gain. According to market data, the cumulative gain in this rebound has exceeded 5%, the largest weekly increase in nearly three months. On the trading front, the index opened higher and fluctuated in the morning, but buying pressure surged in the afternoon, pushing the index steadily upward. The Hang Seng Tech Index also performed strongly, outpacing the broader market and boosting sentiment.

Analysts point out that the Hang Seng Index's return to the 18,000 level holds significant psychological importance. This level has repeatedly acted as support or resistance in the past, and this breakout may open up room for further upside. However, some institutions caution that the rapid short-term gains warrant attention to profit-taking pressure.

Southbound Capital Net Purchases Exceed HK$10 Billion, a Recent High

On the capital front, southbound capital net purchases exceeded HK$10 billion today, the first time in a month that this level has been breached. According to exchange data, the combined net inflows via Stock Connect (Shanghai and Shenzhen) expanded significantly, with technology, financial, and energy sectors favored by capital. The active inflow of southbound capital is interpreted by the market as recognition of the valuation recovery of Hong Kong stocks by mainland funds.

Historically, single-day southbound net purchases exceeding HK$10 billion often occur at turning points in market sentiment. This surge in inflows may reflect institutional investors' optimistic expectations for the medium-term trajectory of Hong Kong stocks. Additionally, the recent stabilization of the RMB exchange rate has reduced currency concerns for mainland funds investing southbound.

Orderly Sector Rotation, Technology and Financials Lead

In terms of sector performance, the market showed a broad rally today, but with clear rotation characteristics. The technology sector continued its strength, with internet leaders and semiconductor stocks posting the largest gains; in the financial sector, insurance and brokerage stocks were active and contributed significantly to the index; energy and materials sectors also rose on the back of commodity price rebounds. In contrast, defensive sectors such as utilities and consumer staples saw smaller gains, indicating an increase in risk appetite.

A fund manager noted that this rebound is driven by multiple factors: first, global risk assets have recovered, with US and European stocks strengthening recently; second, domestic policy signals have been positive, boosting expectations for economic recovery; and third, Hong Kong stocks are at historically low valuations, making them attractive for allocation. These factors combined have driven capital back into Hong Kong stocks.

Analysis of Rebound Drivers and Sustainability

Regarding the drivers of the rebound, the market generally believes that improved earnings expectations and ample liquidity are the two core supports. According to several brokerage research reports, earnings growth for Hong Kong-listed companies is expected to pick up in 2025, especially in the internet and consumer sectors. At the same time, expectations of Fed rate cuts are rising, and the global liquidity environment is becoming more accommodative, which is favorable for Hong Kong stock valuation expansion.

However, the sustainability of the rebound still faces uncertainties. On one hand, geopolitical risks and fluctuations in international oil prices may disturb market sentiment; on the other hand, whether domestic economic data can continue to validate the recovery is key to determining the subsequent trend. Technically, the Hang Seng Index needs to hold above 18,000 points for several days to confirm a valid breakout.

Looking ahead, most institutions adopt a cautiously optimistic stance. In the short term, the market may enter a phase of consolidation, but the medium-term trend is positive. Investors may focus on leading stocks with strong earnings visibility, as well as technology and consumer sectors that benefit from policy support. Meanwhile, it is essential to closely monitor southbound capital flows and changes in external markets, adjusting positions flexibly.