The recent momentum in the stock market has sparked significant interest among investors, particularly as the Hong Kong stock exchange experienced a continuous rise before the A-share market followed suit. By the end of April, investors witnessed favorable shifts in both markets, particularly on April 26, when brokerage stocks took the lead in driving the market upward. This positive trend further accelerated on April 29, with growth stocks surging collectively, culminating in a trading volume that surpassed 1.2 trillion yuan. This surge has left investors with heightened expectations for the upcoming May market.

Experts in the financial sector believe that the recent market trends largely stem from Hong Kong stocks gradually digesting adverse news since March. Market analysts noted that, despite various negative announcements, market performance remained robust, failing to sustain large declines. This resilience ultimately laid the groundwork for a week of consistent gains beginning April 22, followed by a similar upward movement in the A-share market on April 26.

Looking ahead, seasoned market observers highlight that overall valuations remain comparatively low. With the publication of annual and quarterly reports clarifying uncertainties, the market may potentially break away from the dreaded "Sell in May" phenomenon. Predictions suggest that growth stocks could dominate market behavior in May, although this shift may not be prolonged, as the overarching trend for 2024 leans toward value stocks.

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The Hong Kong stock market has recently acted as an early indicator for market enthusiasm. In past years, even minor negative news has precipitated significant downturns in both A-shares and Hong Kong stocks. Many investors have vivid memories from 2022 and 2023 of rapid market reactions, where even favorable news led to mixed trading performances that started strong only to finish weakly.

The current upswing in the Hong Kong market began with investors gradually detaching from adverse stimuli. For instance, on March 12, the release of the U.S. Consumer Price Index (CPI) data significantly exceeded expectations, yet the local market did not falter as anticipated due to underlying structural changes. Similarly, on April 11, another CPI announcement, combined with fears that the U.S. Federal Reserve might delay interest rate cuts, failed to provoke a significant downturn. Instead, a series of optimistic developments ensued, bolstering market confidence.

The announcement on April 19 regarding measures to facilitate capital markets in Hong Kong was a compelling factor in enhancing market sentiment. These measures included broadening the eligible products under the Stock Connect program and facilitating Real Estate Investment Trusts (REITs) participation. On April 23, a representative from the People's Bank of China indicated ongoing transactions in the secondary market for government bonds, suggesting proactive liquidity management and monetary policy strategies.

Foreign investors demonstrated their keen awareness by quickly accumulating shares in key stocks like Tencent Holdings (00700.HK). Throughout this rally, Hong Kong has taken the role of a predictive measure for A-share performance. For example, following a brief decline, the Hong Kong Stock Exchange (00388.HK) rebounded robustly, and on April 22, Tencent saw a notable increase of 5.46%, subsequently driving the Hang Seng Index up by 1.77% with extended gains.

According to Li Lifeng, a strategist at Huaxi Securities, the resilience of Chinese assets amidst rising U.S. treasury rates and a stronger dollar is notable. Meanwhile, as the Japanese yen depreciates and the Japanese stock market weakens, a portion of global capital has shifted investment from Japan onto undervalued Hong Kong stocks. Additionally, since the beginning of the year, strategies focusing on high dividend yields in both A and Hong Kong markets have outperformed expectations, leading to continued inflows into sectors such as finance and energy.

Chief economist at Xinding Fund, Hu Yu, noted that the Hang Seng Index has developed a "double bottom" structure after significant dips in late 2022 and early 2024. The Hong Kong market stands out as a global valuation outlier, leading to an upward momentum trend in both Hong Kong and emerging market equities as the likelihood of increased interest rates from the Federal Reserve remains low.

According to the CEO of Bodao Capital, Wen Tianna, the drawn-out low performance of Hong Kong stocks was finally receiving supportive policies from the mainland, which included incentivizing the listing of more Hong Kong ETFs and encouraging companies to seek public offerings in Hong Kong. However, he cautioned that external interest rate dynamics and geopolitical influences on energy prices continue to pose risks. Furthermore, the recovery of the Hong Kong IPO market remains to be observed; a stronger Hong Kong stock performance could effectively rejuvenate the primary market.

As the rally in Hong Kong stocks became firmly established, attention shifted towards the A-share market just days later, marking a pivotal transition in market leadership. Amid discussions about the management of national assets in the financial sector, a report indicated that efforts are underway to establish a "national team" in finance, which includes creating strategic plans to manage state-owned financial capital more effectively and aligning large state-owned financial companies with global best practices.

On the evening of April 26, Guolian Securities announced ambitions to acquire a controlling stake in Minsheng Securities through a public A-share issuance, a move expected to bolster its capital position during this transitional phase. As a result, brokerage stocks were among the leaders on A-shares, with major players like Citic Securities (600030.SH) regaining strength with a 5.39% increase after previously dipping below their net asset value.

On April 29, the Shanghai Composite Index closed at 3113.04 points—an increase of 0.79%—while the Shenzhen Component Index and ChiNext also gained significantly. Notably, sectors such as real estate and renewable energy showcased powerful performances, contrasting with declines in commodities like oil and precious metals. This rapid succession of trading volume—over 1.2 trillion yuan—has led investors to feel optimistic, especially as the Hang Seng Index also saw gains, indicating a robust market rebound.

Long-standing stock market axioms, such as "Sell in May and walk away," resonate among investment communities, reflecting historical patterns following high spring trading activity. Investors across both mainland and Hong Kong markets often echo sentiment around the "three bearish months" of May, June, and July. Past performance has illustrated downward trends following periods of early-year optimism, evident in the downturns experienced in years such as 2010, 2011, and beyond.

As 2024 unfolded, investors expressed concerns regarding the pace of economic recovery, with the Shanghai Composite Index dipping down to 2635 points in early February. However, the continued arrival of comprehensive earnings reports over March and April began to assuage worries around corporate performance, leading to prevailing optimism within the investment community regarding May's trading prospects.

Investment manager Hu Kunchao from the Dairy Fund observed that recent increases in stakes by major banks—financial service firms indicating confidence in sustained industry and economic growth—further encouraged a positive market outlook. As the Q1 earnings reports were nearly completed, sectors exhibiting prior performance disappointments were seen to have undergone adequate corrections, leading to speculation about rising investor enthusiasm influencing future market directions. Hu expressed hope that consumption metrics from the upcoming May Day holiday would yield positive surprises, bolstering capital market environments further.

Hu Yu believes that the market remains in the nascent phase of a bull cycle. The intrinsic advantages of both A-share and Hong Kong stocks as undervalued opportunities have become increasingly evident, foreshadowing a potential continuation of current bullish trends well into the next few years. Given the solid support at the previously noted 2635 points, many investors might find the current climate favorable for entering the market, with expectations that this rally could eventually grow into a substantial bull market running until 2027.

As the shift in market dynamics occurs, particularly evident in the recent performance of the ChiNext index, investors are pondering how and whether there will be a substantial rotation from large-cap value stocks toward growth stocks in May. The ChiNext index's recent close at 1887.57 points—with substantial gains from leading players in technology and healthcare sectors—has raised questions regarding the sustainability of growth dynamics.

Analyst Fan Jituo from Xinda Securities noted that the implications of recent government policies and improving stock market ecosystems could foster an atmosphere conducive to smaller-cap growth stocks. As the market transitions, it is expected that a high-low rotation may surface, yet it is essential to recognize that the broader trend will remain favoring value.

Further insights from analyst Deng Lijun at Huajin Securities suggested growth and consumer-facing sectors are likely to lead in May. Drawing from historical data trends, sectors tied to technology, consumer electronics, and renewable energy may outperform, while sectors like computer and media may see a relative strengthening despite earlier performance letdowns.

As analysts like Gong Huijing from Wanlian Securities advocate, focusing on industrial machinery and broadening demands for green technologies will prove advantageous, particularly as annual reports enter the revealing phase. Investors are encouraged to keep an eye on cyclical sectors showing strong fundamentals and substantial dividends as they navigate the changing market landscape.