Jefferies has issued a research report indicating a positive view on the prospects of Hong Kong financial stocks this year, citing an active IPO market, structural cross-border capital flows, and initial signs of recovery in the residential property market. The firm expects future Federal Reserve policies to normalize HIBOR, forecasting that the one-month HIBOR will remain around 2.5% in the first half of the year. Regarding credit costs, Jefferies holds a more conservative stance, preferring banks with stronger balance sheets and more cautious risk approaches. Although the local property market has shown early signs of recovery, a structural turnaround has yet to materialize. Jefferies believes the peak of non-performing loans at the industry level has passed and expects commercial real estate-related bad loans to peak and stabilize this year, followed by a one-to-two-year de-risking process. Among individual stocks, Jefferies is most optimistic about HKEX (00388) due to its greater leverage effect and current valuation below long-term averages. The firm upgraded its rating to "Buy" and raised the target price from HK$373.94 to HK$502. While Jefferies also anticipates positive returns for local bank stocks this year, they may underperform international peers due to lower capital return levels. BOC Hong Kong (02388) and Bank of East Asia (00023) were given "Hold" ratings, with a preference for the former based on its resilient fundamentals and higher return levels. The target price for BOC Hong Kong was raised from HK$31 to HK$48. As for Bank of East Asia, Jefferies expects credit costs to remain high this year but sees trading opportunities due to potential index inclusion and Hong Kong's property market recovery. If de-risking progresses faster than expected, further valuation re-rating could occur. The target price was increased from HK$12 to HK$16.