GF Securities released a research report stating that Hong Kong stocks are more sensitive to external risks, given the unclear path of future Fed rate cuts and the peak in lock-up share expiries in December, alongside pressure on fundamental performance. The firm suggests potential rebound points could emerge in mid-to-late December or early January.

Technically, under bullish conditions, the Hang Seng TECH Index has breached the 120-day moving average, indicating substantial downward momentum release. A rebound is possible between the 120-day and 250-day moving averages, with only a 2.7% drop remaining to the 250-day line as of December 9.

**Key Observations on Hong Kong Market Decline:** 1. **Recent Sharp Decline Drivers** Market expectations for a dovish Fed chair were dampened after potential candidate Hassett emphasized data-dependent, cautious rate adjustments, diverging from dovish hopes. This triggered foreign capital outflows from emerging markets, with Indonesia and India seeing notable declines, while southbound inflows into Hong Kong persisted.

2. **Why Hong Kong Underperformed & Accelerated Declines Since Mid-November?** Hong Kong’s fundamentals rely on mainland China, while liquidity hinges on global conditions. While A-shares rose on valuation and U.S. stocks on fundamentals, Hong Kong faced both headwinds. The market is also grappling with a lock-up expiry peak (HKD 126 billion in December, easing to below HKD 50 billion in January), amplifying sensitivity to negative news like Fed policy shifts or Japan’s potential rate hikes.

3. **Potential Rebound Catalysts** - **Mid-to-Late December**: Watch for China’s economic policy signals and the Bank of Japan’s rate decision (Dec 19). Fiscal surprises or a dovish BOJ could boost sentiment. However, fiscal overdelivery is unlikely given stable growth, and yen carry-trade unwinding risks are limited due to already adjusted positions. - **Early January**: Lock-up pressures ease, and Fed minutes may offer dovish cues. - **Technical Indicator**: The Hang Seng TECH’s proximity to the 250-day moving average (2.7% away) suggests rebound potential, historically a support level in past bull markets (2016-17, 2020-21).

**Risks**: Geopolitical tensions reigniting inflation, slower-than-expected global liquidity easing (Fed delays, stubborn bond yields), and model limitations based on historical data.