Hang Seng Index Rebounds in July as AI Trading Shifts from Hardware to Applications

According to China Securities Investment (CITIC), the Hang Seng Index rebounded in July amid a structural shift in global AI trading trends, with consumer and cyclical stocks leading gains while hardware exposure retreated. The rebound reflects three key drivers: declining large language model costs boosting application-layer profitability, policy-backed liquidity improvements and foreign capital inflows, and a weaker dollar index reducing valuation pressure.

CITIC noted the current rally represents post-crash valuation recovery rather than a full market reversal. The index's move from rebound to sustained bull market requires two conditions: stabilizing corporate earnings as internet platforms transition from capex expansion to profitable AI application monetization, and sustained dollar liquidity easing to support market elasticity. The firm expects clarity on these factors during August earnings season.