The Hang Seng Index opened 1.15% higher, while the Hang Seng Tech Index advanced by 1.78%. Gold stocks showed strength, with Lingbao Gold surging over 9%, Zijin Mining International rising more than 8%, and Chifeng Gold gaining over 5%. Conversely, oil stocks declined, as Shandong Molong Petroleum Machinery fell more than 7%, CNOOC Ltd dropped over 3%, and PetroChina Co Ltd decreased by more than 2%.

Market Outlook for Hong Kong Shares

Huatai Securities commented that while the fundamental conditions of the Hong Kong market itself have not seen substantive changes, the level of panic has reached an extreme not seen in nearly two years. The derivatives component, in particular, has hit an extreme low, which may indicate that short-selling pressure has been largely released. This extreme sentiment bottom itself provides a cushion, and there remains room to trade on a potential rebound from oversold conditions and short covering. Regarding allocation, the firm suggests focusing in the short term on heavily shorted, oversold sectors with stabilizing profit expectations, such as discretionary retail and media (core stocks), as well as defensive high-dividend plays like banks (core stocks). The near-term risk-reward for the AI hardware chain is seen as limited, advising a reduction in exposure based on unrealized gains and awaiting lower volatility after the US earnings season in July for re-entry. For the medium term, a balanced approach is maintained, incorporating sectors with improving fundamentals like semiconductors (core stocks), new energy, and machinery, alongside parts of the food & beverage and consumer services sectors that are at low valuations with better profit outlooks.

Guoyuan International highlighted that the situation in Iran has pushed oil prices higher, coupled with resilient US demand, leading to a significant rebound in inflation since the second quarter. This has caused a substantial shift in market expectations for Federal Reserve policy this year. Current uncertainties are high: while monetary policy could potentially tighten, interest rate hikes are constrained by the scale of US debt. The policy direction under a potential new administration remains unclear, and large IPOs like SpaceX could also divert overseas capital. Consequently, there is a high possibility of a near-term valuation pullback in the market.

Everbright Securities noted that the Hong Kong market currently faces multiple headwinds, including heightened expectations for US interest rate hikes, a sharp correction in overseas tech stocks from highs, renewed tensions in the Middle East, and tightened cross-border capital regulations in mainland China and Hong Kong, which are pressuring market liquidity. It is anticipated that the Hong Kong market will struggle to perform well in the short term, with sentiment remaining weak. However, some major internet companies, having seen their valuations decline for an extended period and now at low levels, could provide a degree of stability to the market.