Amid broad pressure on global non-US assets, the Hong Kong stock market defied the trend by rising 1.45% on March 16. This appears contradictory to the macro narrative of non-US asset weakness but actually reveals capital seeking a "safe haven" and undergoing internal reallocation within non-US assets. The low valuation of Hong Kong stocks typically comes with high dividend yields, which is highly attractive to safe-haven capital seeking stable cash flows. Looking ahead over the next six months, discretionary consumption is the sector with the strongest earnings growth and profitability among all Hong Kong market segments, while the financial sector offers ample safety margins. The technology sector has demonstrated dual characteristics during this period of turbulence. The primary views of China Galaxy Securities are as follows: The US-Iran conflict has significantly impacted global markets. If the conflict prolongs, with the Strait of Hormuz remaining nominally open but security risks rising substantially, the "geopolitical risk premium" in energy markets will increase significantly. Oil prices will shift higher and fluctuate at elevated levels, subsequently driving up logistics and operating costs. This will hinder the global decline in inflation, delay interest rate cuts by major central banks, and even lead to considerations of rate hikes in some scenarios. The global economy will likely exhibit a pattern of low growth, high interest rates, and sticky inflation. Synchronized tightening of global monetary conditions will further constrain policy space for various countries. A stronger US dollar will pressure non-US currency nations, prompting capital flows back to dollar-denominated assets. The global interest rate benchmark will rise, suppressing equity valuations and increasing pressure on non-US assets. Against this backdrop of widespread non-US asset pressure, the Hong Kong market's rise on March 16 indicates capital is seeking a "safe haven" and being reallocated internally within non-US assets. Has there been a significant marginal change in southbound capital? From February 27 to March 13, the market value held by international intermediaries decreased by approximately HK$700 billion. This directly reflects international capital, particularly active funds from Europe and the US, choosing to phase out of the Hong Kong market due to global safe-haven needs or to replenish US dollar liquidity. In contrast, the total market value proportion of mainland capital through Stock Connect actually increased from 10.88% to 10.92%. This aligns with the record net purchase of HK$32.994 billion by southbound capital on March 9. Such counter-trend accumulation indicates that southbound capital has acted as a market stabilizer during this adjustment. Is there a seesaw effect in international liquidity? On March 16, southbound capital recorded a net sale of HK$1.101 billion. On March 17, foreign capital saw a net inflow of HK$2.443 billion into the Japanese stock market, though this represented an 84.11% decline compared to February 25, 2026. Despite the net selling by southbound capital, the Hang Seng Index still posted a strong gain, directly confirming that foreign capital was the main driver of the Hong Kong market rebound that day. Some of this capital may have come from Middle Eastern financial markets like Dubai, where funds urgently sought a safe "haven," while some may have originated from foreign capital exiting the Japanese market. The core reason for foreign capital leaving Japan lies in its highly vulnerable economic structure. Rising oil prices could lead Japan into a stagflation dilemma, characterized by imported inflation and slowing economic growth due to resource scarcity. The US-Iran conflict is reshaping the sector landscape of Hong Kong stocks primarily through two channels: inflation expectations and safe-haven flows. Firstly, the energy sector has become the only consensus for both foreign and domestic capital. Secondly, the significant increase in foreign holdings of information technology stocks, primarily internet giants, is largely because Hong Kong tech stocks like Tencent and Alibaba have become extremely attractive after previous declines. From the safe-haven perspective, the main trend involves capital shifting from cyclical stocks to defensive stocks. Currently, global funds are primarily trading in "Risk-off" mode. Geopolitical risks have raised global stagflation concerns, compelling global funds, especially passive funds, to substantially reduce positions quickly to meet redemptions or lower risk exposure. Sector rotation is further accelerating the move away from high-beta assets toward defensive assets. Investment Outlook: The resilience of the Hong Kong market stems from its valuation trough. Low valuations attract safe-haven capital seeking certainty. Foreign capital's choice to enter the Hong Kong market is largely driven by the valuation gap between Hong Kong stocks and other major global markets (such as US and Japanese stocks). The low valuation of Hong Kong stocks is typically accompanied by high dividend yields, which is highly attractive to safe-haven capital seeking stable cash flows. Looking ahead over the next six months, discretionary consumption is the sector with the strongest earnings growth and profitability among all Hong Kong market segments, while the financial sector offers ample safety margins. The technology sector has demonstrated dual characteristics during this turmoil. Risk warnings include potential underperformance of domestic policies and their effectiveness, risks of overseas interest rate cuts falling short of expectations, and unstable market sentiment risks.