Broker Name: China Galaxy International Securities (Hong Kong) Co., Limited
Date of Report: March 3, 2026

Excerpt from China Galaxy International Securities (Hong Kong) Co., Limited report.

Report Summary
• The Hong Kong stock market underperformed both regional peers and onshore Chinese equities in February 2026, with the Hang Seng Index and Hang Seng TECH Index declining sharply, mainly due to regulatory headwinds, AI disruption fears, and ongoing geopolitical tensions.
• Heightened uncertainty from the Iran conflict and US/China relations has created market volatility, with sectors such as oil, energy, and defense benefiting, while airlines and downstream petrochemicals suffer.
• Hong Kong’s tech and consumer discretionary sectors lagged, while industrials and energy outperformed; concerns persist over weak domestic demand, margin compression, regulatory crackdowns, and competition among internet platforms.
• The market favors a “pick-and-shovel” investment strategy, preferring sectors like semiconductors, data centres, industrial metals, utilities, and infrastructure, which are less exposed to technological obsolescence risk.
• Recent regulatory focus has expanded from anti-trust probes to safeguarding gig worker rights, fair competition, and consumer protection, but the intensity remains below the 2020-2022 cycle, with timeline uncertainty.
• AI remains a key long-term theme, with Chinese tech firms and startups rolling out new models and humanoid robots, but there is investor skepticism over monetization and competitive positioning versus unlisted players.
• Macro data showed solid holiday spending growth in tourism and retail, but average spending per capita and box office revenue were down; PPI showed improvement due to commodity prices, but broad-based reflation remains elusive.
• US-China policy risk remains, with the US Supreme Court overturning previous tariffs but the Trump administration quickly imposing new ones, maintaining persistent trade friction.
• Market volatility is expected to persist due to uncertain regulatory timelines, ongoing geopolitical risks, and AI disruption, but some regulatory clarity may emerge by mid-2026.
• Preferred sectors include semiconductors, data centers, industrial metals, power generation, utilities, energy, basic materials, capital goods, and telecommunications.

Above is an excerpt from a report by China Galaxy International Securities (Hong Kong) Co., Limited. Clients of China Galaxy International Securities (Hong Kong) Co., Limited can be the first to access the full report from the China Galaxy International Securities (Hong Kong) Co., Limited website: https://www.chinastock.com.hk