On July 29, 2026, the Hong Kong stock market once again became the focus of global investors. Driven by low valuations and favorable policies, the Hang Seng Index has recently stabilized and rebounded, with the new economy sectors showing structural opportunities. Why choose to trade HK stocks at this point? This article will analyze from three dimensions: valuation trough, new economy rise, and capital flows.
Valuation Trough: A Value Anchor for Global Capital
As of July 29, the Hang Seng Index's P/E ratio was only 9.5 times, with a P/B ratio of 0.9 times, below the 15th percentile of its historical range over the past decade, significantly lower than US stocks (S&P 500 P/E 22 times) and A-shares (CSI 300 P/E 13 times). This valuation discount has attracted massive southbound capital and international hedge funds. According to HKEX data, the average daily net buying through Stock Connect since July reached HKD 4.5 billion, up 30% from Q2. Low valuations not only provide a safety cushion but also leave room for future upside.
New Economy Sectors: From 'Value Traps' to 'Growth Dividends'
In the past, the market often attributed HK stocks' low valuations to a high proportion of traditional industries, but in recent years, the new economy sectors have undergone a qualitative leap. Among the Hang Seng Tech Index constituents, companies in AI, cloud computing, and new energy vehicles account for over 60%. On July 29, the Hang Seng Tech Index closed up 1.8%, leading major global tech indices. Among them, a leading AI chip company surged 12% in one day after announcing a large order, driving the entire semiconductor sector higher. Additionally, the biotech sector outperformed the broader market for three consecutive weeks, boosted by favorable news on innovative drug exports.
- Tech stocks: Internet giants like Tencent and Alibaba reported better-than-expected earnings, with cloud business growth returning above 30%;
- Biotech: Several companies received FDA breakthrough therapy designations for PD-1 inhibitors, with the sector index up 25% year-to-date;
- New energy: Automakers like BYD saw overseas sales double, and solid-state battery technology breakthroughs spurred activity in related stocks.
Capital Flows: Southbound and Northbound Funds Align with Foreign Capital
Post-market data on July 29 showed net buying through Stock Connect reached HKD 5.8 billion, with Meituan, Xiaomi, and WuXi Biologics ranking top three. Meanwhile, international capital is also returning, as expectations of Fed rate cuts weaken the dollar, driving capital flows to emerging markets. Goldman Sachs' latest report upgraded HK stocks to 'overweight', citing an accelerated revaluation of Chinese assets. Notably, HK stock trading volume has been increasing, with average daily turnover exceeding HKD 150 billion in July, up 20% from June, indicating improved market liquidity.
Technical Patterns and Trading Strategies
From a technical perspective, the Hang Seng Index formed a double bottom support near the 18,000-point level, with the MACD indicator showing a golden cross, suggesting a potential challenge of the 20,000-point mark in the short term. Investors can focus on two types of opportunities: first, the recovery of undervalued blue chips such as financial and real estate stocks; second, growth stocks with strong earnings visibility, especially tech and biotech stocks with positive interim reports. Be mindful of disruptions from US Treasury yield volatility and geopolitical risks.
Risk Disclaimer and Conclusion
Trading HK stocks is not without risks. HK stocks face issues such as liquidity divergence, scam stocks traps, and exchange rate fluctuations. Investors should prioritize Stock Connect eligible stocks and avoid small-cap penny stocks. At the current juncture, HK stocks offer both valuation advantages and growth potential, making them a value trough not to be ignored in global allocation. With China's new economy momentum continuing to release, HK stocks are expected to be one of the best-performing equity markets in the second half of 2026.
