US tech giants have released their results; how should we view Hong Kong tech?

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The earnings season for US tech giants and the US-Iran geopolitical game will jointly dictate the trend of the Hang Seng Tech Index this week. Against a backdrop where US stocks have already soared to historical highs and market EPS expectations have not been adjusted for geopolitical factors, whether earnings reports can exceed expectations is the core variable for whether the Hang Seng Tech Index can continue its rebound.

In a report on the 27th, the Dongwu Securities Chen Meng team said that last week, the Hang Seng Tech Index led the major markets lower with a 2.79% decline; the Hang Seng Index and the Hang Seng China Enterprises Index fell 0.7% and 0.78% respectively. On the geopolitical front, setbacks in US-Iran negotiations and rising uncertainty in the Strait of Hormuz suppressed market risk appetite. Afterwards, both sides signaled easing, resulting in a “strong first, weak later, then recovery” trend for the tech sector.

Looking ahead to this week, many tech giants such as Microsoft, Amazon, Meta, Alphabet, and Apple will release earnings reports, combined with key US Q1 GDP preliminary data, core PCE, and other important figures. Fundamental verification for tech and macro data disturbances will be simultaneously released. Meanwhile, Brent crude oil remains in the $100/barrel range. Whether progress in US-Iran negotiations can boost global risk appetite is another variable affecting the pace of overseas capital allocation to Hong Kong stocks.

For Hong Kong stock allocation, Dongwu Securities recommends focusing on value dividends as the core direction, with upstream AI tech hardware viewed as a value anchor, and rhythms guided by US tech earnings reports. It also suggests paying attention to globally scarce Chinese assets such as new energy and innovative pharmaceuticals.

Hong Kong Stocks Lead Decline: Geopolitical Risk and Sector Fundamentals Dominate Pricing

Last week, major global markets diverged. The Korea Composite Index, Nikkei 225, and Nasdaq led gains, while France's CAC40, Eurozone STOXX, and the Hang Seng Tech Index posted the largest declines. All three major Hong Kong indices closed lower, with the Hang Seng Tech Index falling the most at 2.79%; the Hang Seng Index fell 0.7%, and the Hang Seng China Enterprises Index fell 0.78%.

By industry, energy (+3.8%) and utilities (+2.3%) led gains, while healthcare (-5.2%), consumer discretionary (-3.8%), and materials (-3.0%) posted the biggest losses.

Dongwu Securities analyzes that Hong Kong stocks this week are jointly dictated by geopolitical risk and sector fundamentals. Early in the week, setbacks in US-Iran negotiations and escalated maritime standoffs increased uncertainty in the Strait of Hormuz, causing a significant decrease in market risk appetite. Afterward, both sides signaled easing, with Iran denying internal splits and emphasizing the negotiation focus had shifted from the nuclear issue to establishing a lasting ceasefire, somewhat restoring market sentiment.

For the energy sector, as geopolitical pricing sentiment receded, crude oil’s term premium returned to a strong spot market, and rising spot prices lifted the entire futures curve, allowing the energy sector to continue to lead. The tech sector saw a "strong first, weak later, then recovery" pattern—early in the week, driven by AI financing and optimism in the semiconductor supply chain, but suffered midweek under reduced risk appetite. The new energy vehicle sector underperformed late in the week, as the market began to focus on its subsequent sales sustainability, showing that some high-growth tracks are entering an earnings verification stage.

Fund Flows: Southbound Net Inflows Narrow, Finance and Energy Favored

In terms of fund flows, last week southbound capital net inflow was 16.8 billion HKD, down 9 billion HKD from the previous period, but the share of Hong Kong Stock Connect transactions in total Hong Kong stock transactions rose from 43% to 46%, indicating still rising mainland participation.

By sector, southbound capital saw net inflows to finance, energy, and telecoms, while materials saw net outflows. At the stock level, China Mobile, CCB, ICBC, and CNOOC saw net inflows; Tencent Holdings, Geely Automobile, Xiaomi Group-W, and Aluminum Corporation of China saw net outflows.

Mainland ETF flows to the Hong Kong market (HK Stock Connect + QDII) also saw net inflows, with total scale reaching 431.385 billion yuan, up 1.361 billion yuan. Of this, HK Stock Connect ETF net inflows were 546 million yuan, QDII ETF had net outflows of 177 million yuan. Net inflows focused on pharmaceuticals and TMT themes; broad-based Hong Kong stock ETF net outflow was 207 million yuan. In addition, share buybacks totaled 2.8 billion HKD this week, down 300 million HKD from last week; IPOs totaled 27.7 billion HKD, a sharp increase of 19.3 billion HKD over last week; unlocked market cap was 8.2 billion HKD, down 5.9 billion HKD from last week.

Two Key Variables: Earnings Surprise and Geopolitical Easing

Dongwu Securities believes whether the Hang Seng Tech Index can rebound depends on two core variables.

First, whether US tech giants’ earnings can exceed expectations. US stocks have already violently rebounded to historical highs, and since the beginning of the year the market has not downgraded tech sector EPS forecasts due to geopolitical factors, making the actual Q1 EPS results crucial. Dongwu Securities notes only an earnings beat gives tech more room to rise; if results merely meet or fall short of expectations, the tech story will face adjustment, dragging down the Hang Seng Tech rebound. Microsoft, Amazon, Meta, Alphabet, and Apple are releasing earnings one after another, providing a concentrated verification window, with AMD reporting first on April 28.

Second, whether US-Iran talks can make substantive progress. Recently, there have been signals of canceled meetings, extended ceasefires without full implementation, and shipping disruption in the Strait of Hormuz leading to supply tightness, with Brent crude holding firm at $100/barrel. Dongwu Securities highlights that the current level of US stocks has almost not priced in the potential fundamental shocks from geopolitical conflict. If the US-Iran situation unexpectedly deteriorates, it will disrupt market rhythm and impact global risk appetite and overseas capital allocation to Hong Kong stocks.

Value as Anchor, Focus on Scarce Assets

Given the current situation, Dongwu Securities suggests Hong Kong stock allocation should focus on value dividend as the core direction. Upstream AI tech hardware can serve as a value anchor, but performance will likely fluctuate with US tech earnings rhythm. It also suggests continued focus on globally scarce Chinese assets, including new energy and innovative pharmaceuticals.

On the macro data front, this week will see the intensive release of US Q1 GDP initial data (April 29), China's official PMI (April 29), US core PCE price index (April 30), US ISM manufacturing PMI, and China Caixin manufacturing PMI (May 1). These data may further affect market judgment on growth and inflation paths.

Risk Warning and DisclaimerThe market has risks, and investment needs to be cautious. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Investing based on this is at your own risk. ```