According to a research report from China Galaxy Securities, due to the Spring Festival holiday, the Hong Kong stock market was open for only two trading days this week—Monday and Friday—with the three major indices experiencing volatile declines. Looking ahead, the firm recommends focusing on the following areas: Rising geopolitical tensions in the Middle East and potential significant adjustments to U.S. tariff policies have heightened investor risk aversion, which may support volatile upward movements in sectors such as precious metals and energy. The consumer sector currently trades at relatively low valuations; as pro-consumption policies increase and consumer activity gradually improves, this sector is expected to continue rising. The technology sector remains a key medium- to long-term investment theme. After recent pullbacks, valuation pressures have eased. With accelerated updates to large AI models and rapid advancement in AI applications, related segments are poised for a rebound.
Key views from China Galaxy Securities are summarized below:
This week’s performance of Hong Kong stocks: (1) During the week of February 16 to February 20, most major global equity indices rose. However, affected by the holiday, Hong Kong’s market was open for only two sessions, with the three main indices declining: the Hang Seng Index fell 0.58%, the Hang Seng Tech Index dropped 2.78%, and the Hang Seng China Enterprises Index decreased 0.81%. (2) At the sector level, eight of eleven primary industries advanced, while three declined. Energy, materials, and industrials led gains, rising 3.65%, 2.27%, and 1.03%, respectively. Conversely, discretionary consumption, everyday consumption, and communication services fell by 1.86%, 1.50%, and 0.13%. Among secondary industries, oil and petrochemicals, nonferrous metals, construction, home appliances, and paper and packaging outperformed, while discretionary retail, everyday retail, defense, media, and automotive parts lagged.
Liquidity in Hong Kong stocks this week: (1) Due to the holiday, trading on Monday, February 16, lasted only half a day, with Hong Kong Exchange turnover at HKD 85.056 billion. On Friday, February 20, turnover reached HKD 165.461 billion, below the previous week’s average daily level of HKD 240.643 billion. Short-selling volume totaled HKD 23.727 billion, accounting for 14.43% of turnover, significantly higher than the prior week’s average of 12.56%. (2) Stock Connect transactions were suspended this week. (3) Over the seven days ending February 18, global active foreign funds recorded a net inflow of USD 321 million into Hong Kong-listed Chinese stocks, while global passive funds saw a net inflow of USD 697 million—down USD 62 million and USD 805 million week-on-week, respectively.
Valuation and risk appetite for Hong Kong stocks: (1) As of February 20, 2026, the Hang Seng Index’s PE and PB ratios stood at 12.09x and 1.23x, ranking at the 79th and 55th percentiles since 2010. (2) The 10-year U.S. Treasury yield rose 4 basis points from the previous Friday to 4.08%, resulting in a risk premium of 4.19% for the Hang Seng Index, at the 5th percentile since 2010. The 10-year Chinese government bond yield was 1.7899%, implying a risk premium of 6.48% for the index, at the 42nd percentile since 2010. (3) The Hang Seng Shanghai-Hong Kong Connect AH Premium Index declined 1.02 points to 116.40, at the 9th percentile since 2014.
Investment outlook for the Hong Kong market: Overseas, U.S. GDP growth for the fourth quarter of 2025 came in at a quarter-on-quarter annualized rate of 1.4%, well below market expectations of 2.5% and lower than the revised third-quarter figure of 4.4%. On February 21, U.S. President Trump announced plans to raise the global import tariff rate from 10% to 15%. Domestically, in January 2026, the month-on-month decline in sales prices of commercial residential properties in 70 major cities narrowed overall, though year-on-year declines persisted. During the first 20 days of the 2026 Spring Festival travel period, total cross-regional passenger trips reached 5.08 billion, averaging 254 million per day—a record high for the period.
Looking forward, investors are advised to monitor the following sectors: (1) Escalating Middle East geopolitical risks and potential major adjustments to U.S. tariff policies may drive safe-haven demand, supporting volatile gains in precious metals and energy. (2) The consumer sector, currently undervalued, is expected to rise further as pro-consumption policies multiply and consumer vitality strengthens. (3) Technology remains a core medium- to long-term investment theme. Recent corrections have eased valuation pressures, and with faster AI model updates and application advancements, related segments are likely to rebound.
Risk warnings include weaker-than-expected domestic policy impact, slower-than-anticipated overseas interest rate cuts, and unstable market sentiment.