At this time point of August 14, 2026, the global capital market is undergoing a profound restructuring. The uncertainty of the Federal Reserve's monetary policy, the complex evolution of global geopolitics, and the structural transformation of China's economy have made investors face unprecedented challenges in asset allocation. However, amidst this fog, the Hong Kong market has once again become the focus of global capital attention with its unique institutional advantages, extremely low valuation levels, and continuously optimized market structure. For investors in China's A-share market, understanding 'why choose Hong Kong stocks' is not just a matter of diversified allocation, but a key proposition to capture excess returns in the current market environment.

I. Valuation Depression Effect Prominent: The 'Price Anchor' of Global Assets

First of all, it must be mentioned that the current valuation level of the Hong Kong stock market is extremely attractive. As of mid-August 2026, the P/E ratio of the Hang Seng Index still remains in a historically low area, forming a sharp contrast with the high valuation of the US S&P 500 index, and is also significantly lower than the level of comparable companies in the same industry of A-shares. This 'valuation depression' effect provides investors with extremely high safety margins.

In terms of industry distribution, Hong Kong stocks gather a large number of China's best-quality core assets, including internet giants, innovative drug leaders, financial institutions, and outstanding companies in the new energy industry chain. These companies have strong cash flow generation capabilities and moats, but their stock prices have been long-term undervalued due to market sentiment, liquidity discounts and other factors. As the mid-report season deepens, more and more listed companies are showing better-than-expected profitability, and this 'earnings growth + low valuation' double-effect is attracting various institutional funds including southbound funds and foreign capital to continue to lay out. For investors seeking long-term value return, the current Hong Kong stock market is undoubtedly a 'gold mine' full of opportunities.

II. Deepening Interconnection Mechanism: The Return of Dominance and Pricing Power to Southbound Funds

In recent years, the continuous expansion and optimization of the Hong Kong Stock Connect mechanism has completely changed the capital ecosystem of the Hong Kong stock market. Entering 2026, the voice of southbound funds in the Hong Kong stock market has been further enhanced, gradually transforming from early 'followers' to market 'leaders'. This trend is particularly evident in the market performance in August.

The deepening of the interconnection mechanism is not only reflected in the increase of trading quotas, but also in the continuous expansion of the scope of eligible stocks. With the normalization of ETF Connect and more specialized technology companies being included in eligible stocks, mainland investors can conveniently allocate scarce assets in the Hong Kong market through Hong Kong Stock Connect. This change in capital flow is gradually eliminating the premium gap between A-shares and H-shares, and at the same time making the pricing logic of Hong Kong stocks closer to the fundamentals of China's economy. For A-share investors, using Hong Kong Stock Connect to invest in Hong Kong stocks is actually investing in core enterprises representing China's future growth momentum with familiar logic and convenient channels.

New Features of North-South Water Transfer:

• Long-term allocation trend: Funds are no longer just short-term games, but tend to hold high-dividend, low-volatility dividend assets for the long term.
• Rising preference for technology stocks: Although the high-dividend strategy is still the cornerstone, the allocation proportion of southbound funds to new economy sectors such as internet and biomedicine is significantly recovering.
• Increased hedging demand: Using the unique derivative system of the Hong Kong market, A-share investors are increasingly using the Hong Kong market for risk hedging of global assets.

III. Policy Dividends and Institutional Reforms: Reshaping Market Liquidity and Vitality

A series of heavy-weight reforms launched by the Hong Kong Stock Exchange in the past two years are bearing fruit in 2026. From the implementation of the listing system for specialized technology companies under Chapter 18C, to the normalization of trading under bad weather, to the gradual implementation of liquidity enhancement plans, these measures have greatly enhanced the global competitiveness of the Hong Kong market.

In particular, the introduction of the listing rules for specialized technology companies has filled the gap in the Hong Kong stock market in the new economy field, attracting a large number of hard technology companies with high growth potential to list in Hong Kong. This not only enriches the investment targets of the Hong Kong stock market, but also enables investors to share the dividends brought by China's technological innovation. At the same time, the effectiveness of the bad weather trading mechanism marks a new height in the resilience and internationalization of Hong Kong's financial market infrastructure, eliminating the liquidity risk caused by market suspension due to typhoons, and enhancing the confidence of international institutional investors.

In addition, the reduction of stamp duty and continuous optimization of trading mechanisms have also reduced transaction costs at the micro level and enhanced market activity. These institutional dividends are gradually being converted into liquidity premiums for the market, laying a solid foundation for the long-term healthy development of the Hong Kong stock market.

IV. Macro-Hedging Value: The 'Balancer' Between the Dollar and RMB

Against the background of global macroeconomic turmoil, the unique currency peg system of the Hong Kong stock market endows it with special hedging value. The linked exchange rate system linking the Hong Kong dollar to the US dollar makes the pricing of Hong Kong stock assets consistent with the dollar system, which naturally provides a currency hedging function for investors holding RMB assets.

When the US dollar is strong, Hong Kong stock assets can provide exchange rate gains; when the RMB appreciation expectation strengthens, a large number of Chinese stocks in Hong Kong can enjoy the dividends of China's economic recovery. This 'dual-wheel drive' characteristic makes Hong Kong stocks play an irreplaceable 'balancer' role in household asset allocation. Against the expectation of intensified global exchange rate fluctuations in 2026, allocating Hong Kong stock assets has become an important means to diversify single-currency risks and achieve asset preservation and appreciation.

V. Conclusion: Seizing the Opportunities of the Era, Allocating Core Assets in Hong Kong Stocks

In summary, the Hong Kong stock market in August 2026 is in a critical period of 'value revaluation' and 'kinetic energy transformation'. Whether from the cost-effectiveness of valuation, the capital inflow brought by interconnection, or the dividend release of institutional reforms, Hong Kong stocks have shown extremely high investment attractiveness.

For investors with multiple shares of GP, now is the best time to re-examine the investment logic of Hong Kong stocks and actively allocate core assets. It is recommended to focus on the following three main lines: first, state-owned enterprise leaders with high dividends and low valuations, providing stable defensive returns; second, internet technology leaders with better-than-expected performance and valuations in a reasonable range, capturing rebound trends; third, hard technology and biomedicine companies benefiting from policy support and with domestic substitution logic. Through scientific asset allocation and rational value judgment, we have the ability to traverse cycles and win the future in this value depression of Hong Kong stocks.