Citic Securities: Maintain overall optimism towards Hong Kong stocks in the second half of the year.

Citic Securities research report pointed out that affected by the downward revision of performance expectations, disturbances in the Middle East conflict, and the fund suction caused by the momentum trading of overseas AI infrastructure, the valuation of Hong Kong stocks has returned to a more reasonable level. Looking ahead to the second half of the year, we believe that the "constructive strategic stability" of Sino-US relations will boost investor sentiment in Hong Kong stocks; against the backdrop of the "Fifteenth Five-Year Plan", the technology sector is expected to see the scale landing of Token economy and accelerated industrialization process of humanoid robots; and the stabilization of residential real estate and the "return" of the wealth effect of the equity market may drive domestic consumption recovery, forming a positive spiral. After the first quarter report, the negative factors of the Hong Kong stock market fundamentals have been largely priced in. After four significant rounds of outflows since the fourth quarter of 2025, foreign capital has shown signs of returning since mid-May 2026; and after external disturbances, there is also the possibility of accelerating the allocation of Hong Kong stocks by southbound funds. In the second half of the year, we maintain an overall optimistic outlook on Hong Kong stocks, but also alert that there may be disruptions in liquidity in the third quarter due to a peak in unlocking restrictions. If the President of China visits the United States as scheduled in the autumn of 2026, and there are signs of a rebound in macroeconomic fundamentals and corporate profit data in the third quarter, Hong Kong stocks are expected to receive a "double blow" of valuation and performance in the fourth quarter. In terms of allocation, it is recommended to focus on five main themes: 1) the high-growth technology track, including the Token economy industrial chain and the robotics sector, as well as areas such as batteries, commercial space, brain-machine interfaces; 2) under the dividend diffusion market, stable high-dividend sectors like property management, telecommunications, electricity, and "broad dividend + high growth" sectors including energy on the upswing, high-dividend food and beverage, and diversified finance; 3) strong industrial property metals supported by restricted supply, national strategic reserves, and demand supported by AI development and electrification transition; 4) in the stable development of Sino-US relations, with trade friction easing, exports, and overseas chains that may benefit from the rise in overseas business profit margins; 5) the medical sector, especially innovative drugs entering a period of dense data catalytics and CXOs that build high barriers in a positive cycle.