According to Value Partners Fund's Equity Investment Director, Luo Jing, recent turbulence in overseas equity markets has been driven primarily by geopolitical disputes and tariff threats involving the U.S. and Europe over Greenland, concerns about the sustainability of returns on AI capital expenditures, and sharp fluctuations in commodity prices. However, these disruptions are seen as short-term sentiment shocks rather than persistent fundamental risks. Luo expects market volatility to gradually subside once sentiment stabilizes and maintains an overall positive outlook on the medium-to-long-term prospects of global equity markets.
Although Chinese equities have also been affected by external market conditions, Luo noted that current valuations have fallen to relatively reasonable levels and are lower than those in major global markets. Coupled with expectations of a moderate economic recovery in China and ongoing structural optimization as the 15th Five-Year Plan advances, the foundation for growth remains intact. Additionally, overseas funds are still underweight on Chinese assets, and the trend of mainland household savings shifting toward investments is expected to bring incremental capital into the market. As a result, the firm believes A-shares and Hong Kong stocks are poised for promising medium-to-long-term performance.
Regarding southbound capital flows, Luo pointed out that although the pace of inflows has slowed recently, net southbound investments have continued steadily. Three key factors are expected to sustain capital inflows into Hong Kong: (1) the scarcity of core assets, (2) attractive valuations in the Hong Kong market, and (3) strong performance in the IPO market. Luo believes that scarce technology and internet sectors, as well as high-dividend-yielding assets, will continue to attract capital. Meanwhile, as the economy stabilizes moderately, certain consumer sub-sectors may also gain attention and allocation from incremental funds this year.
On the recent outperformance of value stocks, Luo observed signs of improvement in the fundamentals of some value-oriented sectors, such as Hong Kong local property and select consumer industries. The previous strong performance of growth stocks has also enhanced the risk-reward profile of value stocks. Given potential market divergence, Luo emphasized that investors should focus on sectors—whether value or growth—that can tangibly benefit from ongoing economic structural optimization.