Hong Kong stocks extended their gains on Monday, with investor sentiment clearly recovering. The Hang Seng Index climbed 212 points in the morning session to close at 23,079, while turnover surged past HK$130 billion—signaling a notable uptick in capital flow. The tech sector led the rally, with Sunny Optical jumping over 10% at one point. Smartphone component stocks also performed well. As earnings season approaches, buying interest in Alibaba and Tencent pushed both stocks up nearly 2%.

Adding to the positive tone, Citibank released a report raising its 2025 year-end target for the Hang Seng Index to 25,000, citing improving U.S.-China trade relations. This is the first time Citi has suggested the index could reach 26,000 by the first half of 2026. Their analysis highlighted the index’s current forward P/E ratio of 9.5x—still below the long-run average. With expectations of more aggressive rate cuts from the U.S. than China in the year ahead, Citi believes valuation recovery in Hong Kong equities has room to run. The bank upgraded its consumer sector rating to “Overweight” and maintained tech and internet as core holdings. However, it flagged transportation as a potential laggard amid global shipping bottlenecks, downgrading the sector to Neutral.

U.S.–China ties also received a boost from a recent two-day high-level trade meeting in Geneva, which concluded with both sides agreeing to establish a regular consultation mechanism aimed at resolving future disputes. Markets welcomed the move as a hopeful turning point in trade relations. The offshore yuan responded immediately, briefly strengthening past the 7.22 level. In response, Goldman Sachs revised its RMB outlook, projecting a rebound to around 7.0 within the next 12 months, citing improved trade prospects and current undervaluation.

In IPO news, CATL officially began its Hong Kong listing process today. The battery giant plans to issue 117 million H-shares with an offer price capped at HK$263, aiming to raise up to HK$31 billion—potentially the largest IPO on HKEX this year. The retail entry point is HK$26,565, and investor interest is high. High-profile cornerstone investors such as Sinopec and the Kuwait Investment Authority have already signed on. According to the prospectus, the company intends to allocate 90% of proceeds toward expanding its battery production capacity in Hungary, targeting 100 GWh by 2026—strengthening its leadership in the global EV battery supply chain.

Meanwhile, competition among Hong Kong banks to attract deposits is heating up amid expectations of the Fed starting a rate-cut cycle as early as July. Several local institutions are offering attention-grabbing rates: ZA Bank launched a 7-day time deposit with an annualized 13% yield, while Fubon Bank and CCB Asia rolled out one-month deposits at 6.4% and 5.38%, respectively. Major players like HSBC and Standard Chartered also offered over 4% for select clients. Still, financial advisors caution that longer-term deposit rates remain lower and recommend flexible allocation strategies to adapt to potential rate fluctuations.

Boosted by CATL’s IPO momentum and supportive policies, stocks across the EV supply chain also performed strongly. BYD gained over 5%, while Tianqi Lithium and Ganfeng Lithium were up more than 3%. Morgan Stanley’s latest report projects global EV battery demand to grow at a 25% CAGR over the next three years—a bullish signal for upstream lithium material suppliers. The outlook for the sector’s medium- to long-term growth remains firm.

(Compiled from public market data and institutional analysis. For informational purposes only; not a recommendation to invest.)