Morgan Stanley sees Hong Kong market recovery in late July/early August

Morgan Stanley remains constructive on Hong Kong equities, saying the market could see a sustainable recovery in late July and August once global volatility eases. The bank sees accelerating technology-sector earnings growth as a key support. However, near-term sentiment has softened: the weighted MSASI fell 7 percentage points from July 15 to 37%, and the 1MMA measure slipped 2 points to 57%. Broader Chinese trading activity was mixed, with ChiNext turnover down 6% to 667 billion yuan, A-share turnover down 7% to 2.677 trillion yuan, and margin outstanding down 6% to 2.729 trillion yuan, while equity futures turnover rose 8% to 734 billion yuan. Southbound inflows remained a tailwind at $1.6 billion for July 16-22, lifting month-to-date inflows to $11.1 billion and year-to-date inflows to $46.6 billion. The outlook is positive but cautious, with policy and IPO headlines still influencing short-term market direction.