The long-term risk return of Chinese Mainland and Hong Kong stock markets is showing a positive turn, and the fundamental risk return of the two stock markets has begun to show signs of dawn. Firstly, compared to the failed rebound in the past two years, there seems to be a stabilizing trend in the current profit correction trend, or a bottom has been identified. Secondly, the government has launched an unprecedented comprehensive policy package to address the core issue of the sluggish real estate market, targeting weak demand, oversupply, and industry liquidity problems. This includes but is not limited to loosening mortgage interest rates, lowering down payment ratios to historical lows, lifting purchase restrictions, and providing refinancing assistance to convert inventory houses into affordable housing. The policy toolbox is abundant, indicating a broad space for further increases, especially in the context of weak real estate data.

Furthermore, policies to stimulate consumption and economic growth are accelerating, with home appliances, automobiles, and other fields becoming key support targets. There are clear signs of consumer confidence rebounding, tourism consumption has rebounded significantly, and the growth rate of bank deposits has slowed down, reflecting a decrease in gold hoarding and the potential for consumption waiting to be unleashed. At the same time, the government has strong financial strength, and the net issuance of treasury bond will speed up in the coming months. The issuance of special sovereign bonds further demonstrates the determination and confidence of policy support.

Currently, the economic outlook is clearer than two years ago, and systemic risks have significantly decreased. Even in the face of challenges such as defaults by real estate companies, the financial system is still operating steadily, and market expectations have bottomed out and rebounded. China is expected to achieve its economic growth target of 5% by 2024. In terms of position structure, short positions are high, and if the stock market continues to rise in the future, short covering may become a new driving force for the upward trend. Global funds are gradually increasing their allocation of Chinese assets, reversing the trend of reducing holdings and expanding their risk exposure.

From the perspective of valuation, Chinese Mainland and Hong Kong stock markets are still significantly attractive. The long-term P/E ratio is at a historical low, and the market undervaluation highlights the excessive pessimism of investors. Technically speaking, the MSCI China Index has broken through key resistance and entered a technical bull market. Historical data shows that the stock price is expected to further rise after this stage, and the probability of the upward trend continuing is high.

Of course, the tension between China and the United States, as a long-standing external uncertainty factor, especially as the US presidential election approaches, requires vigilance. However, after years of competition, the market has developed strong adaptability to such geopolitical risks, as evidenced by the recent electric vehicle tariff incident not causing significant market fluctuations. In general, the stock markets of Chinese Mainland and Hong Kong are stepping into an upward channel with more balanced risk and return.