Lower Trading Frequency and Structural Realignment

This is Huatai Research's Overseas Weekly focusing on the Hong Kong stock market. Our pre-holiday anticipation of a short-term rebound is starting to play out, with three marginal changes worthy of attention: First, interest rate pressure has marginally eased, but conditions for a trend reversal are not yet present; higher for longer remains the baseline scenario. Second, Southbound funds returned as expected, recording a net inflow of c. HKD6.5bn on 8 October by buying on dips, while the short-selling ratio fell from above 20%; active foreign capital outflow narrowed significantly despite a fifth consecutive week of net outflows. Third, panic pricing in derivatives cleared within a single day — on 8 October market makers' gamma turned negative with open interest PCR spiking to 2.08;