Policy Certainty and Enhanced Liquidity Propel Hong Kong Tech Shares; Alibaba and Baidu Rally Nearly 6%

August 25 — Supported by a convergence of regulatory and financial tailwinds, Hong Kong’s technology sector exhibited robust gains. At the close, Alibaba-SW (09988.HK) advanced 5.68%, Baidu Group-SW (09888.HK) climbed 5.66%, NetEase-S (09999.HK) increased 5.07%, and JD Group-SW (09618.HK) rose 4.53%.

On the regulatory front, authorities have unveiled new pricing guidelines designed to curb destructive competition among internet platforms. Jointly drafted by the National Development and Reform Commission, the State Administration for Market Regulation, and the Cyberspace Administration of China, the “Rules on Internet Platform Pricing Behavior (Draft for Public Comment)” will be open for public feedback from August 23 through September 22, 2025. These measures seek to standardize platform pricing practices, safeguard both consumer and merchant rights, and foster a more orderly platform economy.

Financially, southbound inflows via the Stock Connect channels have surged, with net purchases of Hong Kong equities reaching HKD 35.876 billion on August 15—a record since the mechanism’s inception. Correspondingly, ETFs tracking the Hang Seng Tech Index have attracted steady capital, driving assets under management past HKD 35.3 billion, an all-time peak.

Institutional analysts now see significant upside for tech benchmarks that have lagged this rally. Zheshang Securities highlights that the Hang Seng Tech Index underperformed in part due to profit margin pressures from intense competition in food delivery, compounded by liquidity tightening by the Hong Kong Monetary Authority amid a weak Hong Kong dollar. Since late June, the authority has withdrawn liquidity to stabilize the currency, restoring interbank funding to normal levels and appreciating the Hong Kong dollar, thereby limiting further tightening.

At the Jackson Hole symposium, Federal Reserve Chair Jerome Powell signaled a dovish shift by noting that “policy remains restrictive and evolving risks may prompt adjustments,” reinforcing expectations of global liquidity easing. This environment augurs well for Hong Kong’s markets, suggesting that the Hang Seng Tech Index could experience a pronounced catch-up rally.

Shenwan Hongyuan concurs that recent underperformance merely represents consolidation after rapid gains. As interim results are released, sectors with subdued expectations—where negatives have been largely digested—stand to regain investor focus. The current phase offers an opportune moment to establish positions in core internet and tech-weighted indices, while cyclicals and consumer names may also deliver secondary rebounds.

A report from Guotou Securities’ Lin Rongxiong team underscores a historical pattern of rotation between China’s ChiNext Index and the Hang Seng Tech Index. When ChiNext outpaces Hang Seng Tech by roughly 20 percentage points over a 60-day rolling return, a rebound in the latter typically follows. With the differential now at 18 points, and ChiNext approaching fresh highs, the Hang Seng Tech Index—characterized by substantial institutional holdings and a barbell strategy profile—appears poised for a catch-up phase.