Two-Month Retreat Exceeds 15%; Hang Seng Tech Index Long-Term Thesis Intact As Market Focuses On AI Implementation

In The View Of Many Analysts, The Recent Short-Term Pullback In The Hang Seng Tech Index Has Not Altered The Long-Term Investment Case For Hong Kong’s Technology Leaders. With Tencent’s “Hunyuan” Foundation Model And Alibaba’s “Qianwen” Applications Gradually Rolling Out, The Market Is Increasingly Examining How AI Deployment Drives Secondary Growth For Internet Companies. Over The Long Run, Backed By Valuation Advantages, Capital Support, And AI-Enabled Industrial Upgrading, The Hang Seng Tech Index Retains Compelling Long-Term Value.

Before October, Hong Kong Tech Bellwethers Were Buoyant. Among The 30 Constituents Of The Hang Seng Tech Index, Nine Stocks Rose Over 100%, With Hua Hong Semiconductor Climbing Nearly 270%; Eight Others—Including Tencent, Baidu, And Xiaomi Group—Gained More Than 50%. Only Meituan And Haier Smart Home Declined, With Meituan Down Over 30%.

Since October, The Picture Has Shifted Dramatically: Of The 30 Constituents, Only Four—Including Midea Group And Haier Smart Home—Advanced, While Seven Fell More Than 20%, Such As Li Auto And Sunny Optical Technology, Both Down Over 27%. Ten Names Dropped Between 10% And 20%, And Tencent And Meituan Each Declined Around 5%.

Capital Flows Mirror The Change. Wind Data Show That Over The Past Month, Southbound Funds Registered The Largest Net Selling In Alibaba At HKD 2.5 Billion, With Li Auto At HKD 1.2 Billion, And Sunny Optical Technology And Kuaishou Seeing Net Outflows In The Hundreds Of Millions.

Huang Lichong, President Of Huisen International Capital, Attributed The Hang Seng Tech Decline To Three Overlapping Forces: First, Prior Gains Were Excessive, Stretching Valuations And Positions, Making October A Window For Profit-Taking; Second, On October 10, The United States Announced Tariffs Up To 100% On Chinese Goods And Tightened Key Software Export Controls, And The Hang Seng Index Slumped On The 13th, With Technology—As “Policy-Sensitive Assets”—Systematically De-Rated; Third, Overseas AI Leaders—Especially In U.S. Markets—Suffered A November “Mini Crash,” Shedding USD 800 Billion–1 Trillion In A Week, With The Nasdaq Down About 3%–3.7%, Suppressing Global Tech Risk Appetite.

Year-End Style Rotation May Also Be At Play. As The Calendar Turns, More Capital Is Shifting Toward Dividend Assets Such As Banks And Non-Bank Financials Rather Than High-Volatility Tech. Xingzheng International Noted That, Given This Year’s Strong Gains In Hong Kong Equities—With Some Names Doubling—Investors And Fund Managers Tend To Lock In Profits Before Year-End, Redirecting Funds From High-Growth Stocks To High-Yield Defensive Names. As Investment Style Tilts, Traditional Economy Shares Strengthen While New Economy Stocks Lag.

Despite Near-Term Swings, The Long-Term Thesis Of The Hang Seng Tech Index Remains Intact. Its Constituents Largely Comprise Internet Giants Not Listed On A-Shares, Alongside Semiconductor And New Energy Vehicle Companies—Scarce Assets For Mainland And Global Investors.

Yang Delong, Chief Economist And Fund Manager At Qianhai Kaiyuan Fund, Observed That The Recent Correction Led To A Sharp Retreat In The Hang Seng Tech Index, Leaving Many Investors Unsure Whether This Is A Trend Reversal Or A Pullback Within An Uptrend. “I Tend To Believe Hong Kong Stocks, Like A-Shares, Are In A Slow Bull Market Lasting Two To Three Years, Not A One-Year Rally. The Tech And Internet Sectors Within The Hang Seng Tech Index Benefit From Economic Transformation, So This Adjustment Should Be Short-Term.”

Huang Lichong Also Highlighted Valuations Still Below 2021 Peaks. By Late September, The Hang Seng Index And Hang Seng Tech Index Traded At P/E Ratios Of 11.8x And 23.7x, Versus 17.6x And 70x At Their 2021 Highs. The Hang Seng Tech Index Level Remains About 40% Below Its Record.

Analysts Emphasize That Hong Kong Tech Aggregates The Most Dynamic Innovation Forces In China’s Economic Transition. Under The Dual Drivers Of AI And Globalization, Hong Kong Tech Remains A Key Arena For Positioning In China’s New Economy.

This Year’s Tech Rally Initially Stemmed From DeepSeek’s Breakthrough, Which Pushed Chinese Tech Into The Global Spotlight And Prompted A Reassessment Of Core Chinese Assets. As Months Passed, U.S. Markets Grew Wary Of An AI Bubble, While Domestically The Focus Shifted To Concrete AI Execution.

Huang Lichong Noted That The Revaluation Logic Has Moved From “Storytelling” To “Earnings Proof.” Tencent’s Third-Quarter Revenue Rose About 15% Year-On-Year, With Management Emphasizing The Penetration Of The “Hunyuan” Base Model And “Agent AI” In Advertising, Content Production, And Game Operations; Internally, Over 90% Of Engineers Are Using AI Tools In Daily Development, And Efficiency Gains In Ads And Games Are Appearing In The Income Statement. Alibaba Repeatedly Raised Its Three-Year AI And Cloud Infrastructure Investment Plans, With Single Announcements Exceeding USD 50 Billion; Quarterly AI Revenue Maintained Triple-Digit Growth, Lifting The Share Price Nearly 20% In A Single Day. Earlier Breakthroughs By Domestic Models Such As DeepSeek Triggered A “China Concept AI” Wave, Driving The Hang Seng Tech Index To Log Its Strongest Multi-Week Rally Since 2020. AI Is Now Tangibly Boosting Cash Flow And Valuations For Leading Platforms.

Following The USD 800 Billion–1 Trillion Valuation Reset In U.S. AI Stocks, Global AI Asset Pricing Has Shifted From “Across-The-Board Premiums” To “Selective Merit.” Investors Now Prioritize How Much Verifiable Profit Each Unit Of Capital Expenditure Generates, Rather Than Pure Model Performance Or Compute Expansion.

In This Context, Huang Lichong Anticipates AI And Robotics Will Drive A “Structural Revaluation,” With Gains Concentrated In Comprehensive Platforms Such As Tencent, Alibaba, And Baidu—Which Possess Data, Scenarios, And Cloud Infrastructure—and Select Hardware/Compute Chain Companies; Those Lacking Ecosystems And Leaning On AI Narratives May Be Marginalized As The Bubble Deflates Globally. Over The Next One To Three Years, The Hang Seng Tech Index Is More Likely To See “Leaders Gradually Lift Amid High Overall Volatility” Than A Broad-Based Index Bull Market. AI Will Be The Engine For Medium- To Long-Term Value Repair In Hong Kong Tech, But Only Firms That Translate AI Into The Profit Statement Deserve Genuine Revaluation.

Yang Delong Added, “This Year’s Outperformance In Technology Has Deep Roots. The ‘15th Five-Year Plan’ Recommendations Have Been Officially Released, With A Focus On Advancing Technology Innovation Areas Such As Bionic Robots, Chips, Semiconductors, Computing Power, Algorithms, Low-Altitude Economy, Deep-Sea Equipment, And Innovative Drugs. Policy Support For Tech Innovation Is Likely To Convert Into Actual Results Over The Next Two To Three Years, Lending Greater Sustainability To The Rise In Technology Stocks.”