As August began, the Hong Kong stock market continued its upward trend, with the Hang Seng Index closing at 26,009.46 points on August 21, marking five consecutive days of gains. Meanwhile, Citigroup upgraded its rating on Chinese stocks to 'overweight' and set a target of 29,600 points for the Hang Seng Index by the end of 2026. *Targets are institutional forecasts and not guaranteed values.

Positive changes have also emerged in capital flows. Since July, as of August 5, net inflows from southbound capital have totaled HKD 75.1 billion; since July 16, foreign capital inflows have exceeded HKD 60 billion. While incremental capital continues to enter the Hong Kong stock market, its flow is no longer evenly distributed but is increasingly concentrated in high-growth sectors such as technology.

Hong Kong Stocks Face Performance Examination: From 'Valuation Narratives' to 'Earnings Validation'

The current rebound in Hong Kong stocks differs logically from previous ones. Pop Mart provides a reference point. Its interim results, disclosed on August 20, showed revenue of RMB 17.17 billion for the first half, up 23.8% year-on-year, with adjusted net profit of RMB 5.16 billion, up about 10% year-on-year. However, both revenue and profit growth fell short of market expectations. More notably, its overseas business faced phased pressure—overseas revenue declined 11.1% year-on-year in the first half, with the Americas and Asia-Pacific markets dropping 16.5% and 9.7%, respectively. THE MONSTERS, one of its previously high-growth IPs, generated RMB 4.45 billion in revenue, down about 7.5% year-on-year. Company management admitted that, affected by a high base and operational adjustments, it is unlikely to meet the previously set target of 20% revenue growth for the full year.

Pop Mart's current pressures do not imply a reversal in industry logic but rather suggest that after a period of rapid growth, the market is reassessing the lifecycle of super IPs, the efficiency of overseas expansion, and whether new growth drivers can timely take over. On August 21, the company's stock price opened sharply lower, reflecting the capital market's sensitivity to 'growth deceleration.'

This logic is not unique to Pop Mart. CICC noted that in the Hang Seng Index's 13% and the Hang Seng Tech Index's 14% rebounds, valuations contributed about 11 percentage points, while earnings contributions were relatively low. Huatai Securities also cautioned that, without clear signs of fundamental improvement, the space for reliance solely on capital inflows and valuation increases is relatively limited. Once overall market valuations return to neutral levels, the market will scrutinize each earnings report more critically—valuations built on expectations earlier now need earnings to deliver; failure to meet expectations leads to declines.

Pop Mart is not an isolated case. Companies like Kuaishou, Alibaba, XPeng, and Hua Hong experienced weaker-than-expected market performance and declines after announcing their results.

Take Kuaishou as an example. Its second-quarter results, announced on August 19, showed revenue of RMB 35.54 billion, up 1.4% year-on-year, with adjusted net profit of RMB 3.91 billion, down 30.3% year-on-year. Advertising revenue grew 4.4%, while live-streaming business revenue fell 13.5%. Gross margin declined from 55.7% to 51.6% year-on-year. Meanwhile, Kuaishou increased its AI investments, with R&D expenses up 34.7% year-on-year in the second quarter. On the second trading day after the results announcement, Kuaishou's stock price briefly plunged.

While short-term price movements are not definitive indicators, they suggest a potential shift in the Hong Kong stock market's logic: from 'valuation-driven' to 'earnings validation.' Valuations built on expectations earlier now need earnings to deliver; otherwise, they may be repriced by the market after earnings announcements.

Market Preferences Shift: Reassessing 'Growth Sustainability'

In recent years, market attention on internet companies has focused on domestic consumption, platform economies, and traffic dividends. As domestic growth dividends narrow, the market is seeking new growth drivers.

Newborn Town Technology is at the center of this observation. On August 25, Newborn Town released its 2026 interim results, reporting net profit attributable to shareholders of USD 99 million for the first half, up about 45.8% year-on-year, with corresponding ROE of about 25% and ROA of about 14% (according to Wind data), and a gross margin of 57.8%.

As a global AI social entertainment company, Newborn Town has developed a product matrix covering multiple global markets and continues to pursue 'product replication + country replication.' From the Middle East and Southeast Asia to Latin America, Japan, and Europe, its various products are forming multi-regional, multi-product growth support. Products like SUGO and TopTop have achieved sustained user and commercial growth in multiple overseas markets, indicating that Newborn Town's global layout is evolving from single-point breakthroughs to multi-market realization.

The market now evaluates not just whether a company is growing but whether its growth is sustainable and can transcend single-market cycles. Looking ahead, the company's net profit attributable to shareholders for 2024 and 2025 is estimated at about RMB 480 million and RMB 935 million, respectively, with a 94.6% year-on-year increase in 2025. This suggests that not only is growth being maintained, but the profitability of shareholders' equity and assets remains high.

Thus, the capital market logic for Newborn Town is not just about 'how much overseas market potential remains' but whether existing growth can sustain, whether new markets can contribute incrementally, and whether these growth factors can continuously translate into profits and shareholder returns. On the day after the earnings announcement, Newborn Town's stock price closed up 12.98%, briefly surging over 15.5%, reflecting a very positive market response.

Similar logic is being validated. On August 19, Kingsoft Cloud announced its second-quarter results, and its Hong Kong stock price opened 10.41% higher the next day, briefly surging over 11%. In the first half, the company's total revenue reached RMB 3.07 billion, up 30.8% year-on-year, hitting a single-quarter historical high. Public cloud revenue was RMB 2.36 billion, up 45.1% year-on-year; AI cloud billing revenue reached RMB 1.33 billion, up 82% year-on-year, accounting for 56% of public cloud revenue. More critically, the company reported its first GAAP operating profit turnaround, with adjusted operating margin improving significantly from -7.1% to 4.0% year-on-year. Guoyuan Securities noted that the first operating profit turnaround marks the company's transition from 'revenue growth without profit growth' to high-quality growth; CICC maintained its 'outperform' rating and USD 20 target price; Jefferies raised its target price per share from USD 17 to USD 17.7. *Institutional views, not investment advice.

The positive market feedback essentially reflects recognition of Kingsoft Cloud's ability to deliver on its AI cloud business—serving leading large model clients like Kimi, MiniMax, and Zhipu AI, and benefiting from Xiaomi's 'human-vehicle-home ecosystem' strategy and Kingsoft Office WPS AI's computing demand. As AI computing investments begin to translate into revenue, gross margin, and positive operating profits, the market is willing to pay a premium for the realization of a 'second growth curve.'

This week, the Hong Kong stock market will also see interim results from technology internet companies like Meituan, SenseTime, and Baidu. Under the current market logic, the market expects not just a 'passable' report card but whether companies can demonstrate growth resilience across cycles and whether clear second growth curves are emerging.

Q4 Outlook: Focusing on 'Valuation + Performance' Double Boost

Looking ahead to the fourth quarter, several institutions have offered relatively clear judgments.

CITIC Securities explicitly stated in its investment strategy for the second half of the year that if macro fundamentals and corporate earnings data rebound in the third quarter, the Hong Kong stock market could see a 'valuation + performance' double boost in the fourth quarter.

From a valuation perspective, the Hang Seng Index's current PE is about 10x, below its 10-year average. While expansion space on the denominator side is relatively limited, confirmation of earnings improvement on the numerator side will provide more solid upward momentum for the market. Goldman Sachs mentioned the allocation value of Hong Kong stocks in its latest strategy report, arguing that current valuations already incorporate significant pessimistic expectations and that upward revisions in corporate earnings in the second half will drive further index gains. *Not investment advice

Overall, the Hong Kong stock market in the fourth quarter still offers structural opportunities. The quality of the rebound depends not on how high sentiment can push prices but on how solidly earnings can materialize. Directions filtered by capital amid differentiation—AI applications, technology growth, and globalization realization—remain key observation lines worth following.