On October 2nd, with both the Hong Kong and A-shares experiencing a market halt, the Hong Kong stock market operated independently and witnessed a dramatic upswing across all sectors, maintaining a consistently high trading volume.

By the time the markets closed, the Hang Seng Index surged by 6.2%, while the Hang Seng Tech Index rose by 8.53%, and the Hang Seng China Enterprises Index increased by 7.08%, with a total trading volume amounting to HKD 434.02 billionNotably, shares of domestic property companies skyrocketed, with R&F Properties soaring by 397%, Agile Group jumping over 160%, and Shimao Group climbing by 153%. Additionally, Chinese brokerage stocks experienced a breakout, with China Merchants Securities rising over 81%, CITIC Securities up by over 39%, and Shinhan Hongyuan Hong Kong boosting by over 206%.

"Since the end of September, there has been a notable improvement in the investment atmosphere

Walking along Central street, nearly everyone I see is discussing the stock market rally; during lunch, you can hardly find anyone ordering the cheaper double lunch set anymore as everyone is opting for more expensive takeout," shared Xiao Chen, a trader working in Hong Kong, with reporters.

Conversely, a foreign private banking wealth manager in Central commented, "It's been extremely busyI haven't experienced this level of busyness in a long timeToday, I only managed to eat for four minutes amidst numerous client inquiries that need to be addressed, and I had to cancel my planned vacation."

While A-shares remain closed, capital has proactively entered through Hong Kong stock market ETFs, positioning itself for potential gains.

The South China Sci-Tech Innovation Board 50 ETF listed on the Hong Kong Stock Exchange surged by over 230% at one point during the trading day

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In light of this, South China East Ying felt compelled to issue a risk alert at midday, urging shareholders to be aware of the market trading risks involved, including but not limited to the significant premiums in secondary market pricing, and advising caution while trading A-share ETFs during the closure of the mainland securities market for the National Day holidayFollowing this risk warning, the South China Sci-Tech 50's growth tapered, ultimately closing with a 28.79% increase, accumulating a turnover of HKD 168 million and a turnover ratio of 196.7%.

The robust increase in Hong Kong shares today serves as a continuation of the A-shares' performance, and the ongoing trading of Hong Kong stocks during the National Day holiday has led investors to anticipate the trajectory of A-shares post-holiday

Nevertheless, some analysts have cautioned that the Hong Kong market will continue to trade independently for several days before the A-shares reopen, necessitating close monitoring to determine if the current market momentum can be sustained.

"Even though I'm currently on vacation, I was stunned by the historic performance of Chinese stocks as soon as I got off the plane," remarked Hong Hao, the chief economist of the Sira Group"With A-shares closed for the National Day holiday while Hong Kong stocks continue to rise, it underscores the optimism among Hong Kong investors regarding market recovery and favorable policies." Hong reiterated that the Chinese market represents a significant contrarian value investment opportunity this year, describing it as a once-in-a-lifetime historic event for many analysts and traders

Presently, various indicators on the market have reached historic highs, including five-day increases and trading volumes.

"Today, Hong Kong stocks are no longer predominantly driven by the inflow of mainland funds; instead, it indicates that various foreign capital markets, which previously had a severely low allocation to Chinese stocks, are rapidly readjusting their investment portfolios," stated Chen Guo, the chief strategist at CITIC SecuritiesChen previously noted in a teleconference that this round of market rally is characterized by an upward revision of profit expectations, a decline in risk-free interest rates, and an increase in risk appetiteTherefore, it is not merely a simple rebound from oversold levelsIn fact, the level of increase in the Hong Kong stock index can be reasonably viewed as a bull market having been established, suggesting that the A-share market may well be in the throes of a bull market as well.

"The surge in Hong Kong stocks perfectly exemplifies the behavior of foreign and local investors rushing to partake in the market due to fear of missing out; no one wants to miss this feast," analyzed Yan Zhaojun, a strategist from Zhongtai International

"From the market, we observe that the Hang Seng Tech Index, consumer discretionary sectors, and real estate, which faced the most significant valuation pressures prior, have exhibited impressive rebounds, while heavyweight stocks in the index also soaredThe driving force behind this is the return of foreign funds that had previously allocated too little to Hong Kong stocks, coupled with a reversal in trading strategies that favored shares in the Japanese and American marketsThis situation mirrors the reversal of the yen's carry trade at the beginning of August, reflecting a similar shift occurring in the Chinese stock marketFurthermore, the gamma squeeze on options has intensified both the market's rise and the individual stock rallies, as the sellers of call options are compelled to hedge their risks hedging, further boosting the overall market and specific stock performance.

"Based on discussions with investors, this round of increasing stock prices is expected to continue," proposes a report from Daiwa Securities

Although most investors believe tangible policy measures are needed to transform the long-term market outlook, Daiwa suggests that this process may take several months, but investors will likely act swiftlyThe firm also highlighted that numerous global long-term investors are eager to correct their under-allocation to China, with internet stocks emerging as a focal pointAdditionally, cities like Shanghai, Shenzhen, and Guangzhou have significantly relaxed home purchase restrictions for non-resident buyers, raising expectations that this round of easing policies will outperform prior instancesGiven the strong market atmosphere, there is a short-term optimistic outlook for domestic property sector performance.

According to Haitong International, last week saw a rebound in China's internet sector, with the Hang Seng Tech Index climbing over 20% between September 23 to 27, while the China Network ETF surged 25% during the same period

Upon reviewing the previous two years' rebounds in the internet industry, it becomes apparent that the majority of stocks in this sector have yet to recover to their pre-pandemic highsHaitong suggests that investors adopt a bottom-up stock-picking approach, focusing on improvements in company valuations and fundamentals while paying close attention to sub-sectors such as e-commerce, entertainment, online travel agencies and hotels, education, and online advertising.

UBS Global Research stated, "Historically, October is one of the better-performing months for the Chinese stock market, outperforming the average monthly performance by 1.5 percentage pointsWith improved market sentiment and low positioning, we expect the short-term momentum to persist through mid-October. Furthermore, after this substantial increase, the critical factors to watch will be the scale and type of fiscal measures in place

There is an anticipation that packages supporting consumption and local government financing will be particularly appealing to investors, alongside the prospect of additional stock market support policies focusing on enhancing corporate governance in the upcoming quarters.

"The current sharp rise in Hong Kong stocks at an extremely steep rate is unsustainable, as the Hang Seng Index's volatility gauge surged by 27.2%, reaching its highest point in over a yearAs the Hang Seng Index approaches the peak from early January 2023, combined with an already significant short-term valuation repair, it is expected that the volatility of Hong Kong stocks will notably increase, and there could be selling pressure as profit-taking emerges at high levelsIf the market transitions into a consolidation phase for digestion, it is anticipated that strong performers in the second-tier industries with profit bases will lead the charge, and recently underperforming shares in domestic banks, energy, telecommunications, and other high-dividend sectors may also attract capital backflow," Yan Zhaojun opined.