To The Moon

According to FSMOne (Hong Kong) Assistant Manager of Portfolio Management and Research, Yuxuan Xie, the valuation repair of the Hang Seng Index was largely completed last year. Considering that valuation expansion can only provide short-term momentum, the medium to long-term trend of the index still depends on a recovery in corporate earnings. For the Hang Seng Index to sustain its upward trajectory, it will require support from another critical factor—corporate profit growth. Among the various sectors of the Hang Seng Composite Index, the top three industries ranked by projected profit growth for 2026 are consumer discretionary, raw materials, and information technology. The growth expectations for these sectors are above the market average, indicating a relatively strong momentum for corporate earnings recovery. On the other hand, liquidity has become a key factor supporting the performance of Hong Kong stocks. Against a backdrop of increased volatility in global financial markets, ample capital inflows enhance market depth and investor confidence, thereby supporting overall market performance. Last year, northbound capital consistently flowed into Hong Kong stocks, with net inflows totaling over one trillion Hong Kong dollars, reflecting strong investment enthusiasm from mainland investors. Concurrently, benefiting from policies encouraging dual listings of leading mainland companies, Hong Kong's IPO fundraising exceeded HKD 285.8 billion last year, ranking first among global exchanges. Yuxuan Xie stated that although Hong Kong stocks recorded significant gains last year, given the ongoing expansion of AI applications driving the development of tech companies, coupled with enhanced market liquidity from northbound capital and IPOs, structural investment opportunities in Hong Kong stocks are expected to persist. The market can be considered one of the key focuses for 2026, offering attractive investment value. Based on a target price-to-earnings ratio of 11 times, the target for the Hang Seng Index in 2026 is around the 30,000-point level. Using a target P/E of 12 times, the target for the MSCI China Index in 2026 is 98. FSMOne (Hong Kong) General Manager, Jialang Chen, said that AI development will continue to be a primary driver for US stocks, with local semiconductor sales remaining robust and capital expenditure from tech companies expected to stay high. AI-related investments will continue to support overall economic growth and help offset pressures from slowing consumption. However, recent weakness has emerged in the US labor market, and with ongoing changes among Federal Reserve officials, political pressure from the Trump administration is expected to prompt further interest rate cuts. He also mentioned that, considering structural factors such as the stickiness of services inflation and persistently high wage growth have not yet dissipated, core inflation may rebound in the future. It might not smoothly decline to the 2% policy target, and resurgent inflation concerns could then limit the scope for further monetary policy easing. Therefore, the Federal Reserve is anticipated to implement two interest rate cuts in 2026.