During the first half of 2025, Hong Kong's stock market shone brightly, with the Hang Seng Index, Hang Seng TECH Index, and Hang Seng China Enterprises Index each registering impressive gains of approximately 20%. At the forefront of this surge were southbound funds, which have emerged as the primary catalyst behind Hong Kong stocks' upswing. As of July 8, net inflows for the year have soared to RMB 703.149 billion, nearing the total for the entire preceding year. These funds primarily gravitated towards sectors such as technology, healthcare, consumption, and high-dividend industries.

Public funds exhibited a preference for investing in scarce technology and consumption assets, whereas insurance funds placed greater emphasis on the financial and energy sectors, which offer high dividends and stable cash flows. This influx of capital has significantly enhanced market liquidity in Hong Kong stocks, with the average daily trading volume of the three major indices increasing by 2.28 times compared to the same period last year.

Furthermore, the recovery of the IPO market has bolstered the appeal of the Hong Kong stock market. In the first half of the year, Hong Kong stocks raised over HKD 107 billion, with the number of IPOs increasing by 40% year-on-year. The listing of high-quality companies such as CATL and Honey Snow Ice City has further solidified market confidence. Despite the substantial gains already achieved, Hong Kong stocks continue to offer attractive valuations, with the P/E ratio of the Hang Seng TECH Index still hovering at a historical low.

Institutions recommend that investors adopt a barbell allocation strategy, balancing high-growth technology sectors with high-dividend stable assets, to effectively manage overseas risk factors and capitalize on the market's current momentum.