On June 3, Kingsoft fell 5.01% in regular trading, trading at 22.28 HKD/share, with trading volume of HKD 363 million. The decline was driven by the convergence of imminent passive fund selling pressure from Hang Seng Tech Index removal and multiple brokerage target price downgrades.

Hang Seng Indexes Company previously announced the removal of Kingsoft from the Hang Seng Tech Index, with changes to be implemented after the close on June 5 and effective from June 8. As the execution window approaches, passive index-tracking funds face mandatory selling pressure. Simultaneously, Bank of America Securities cut its target price from 27 HKD to 24 HKD, maintaining a Neutral rating, while CICC lowered its target by 12.5% to 28 HKD, raising its conglomerate discount from 55% to 60% to reflect the index exclusion impact.

Fundamentally, Kingsoft reported Q1 gaming revenue declining 22% year-over-year, with operating profit down 34.3% as gaming margin compression weighed on overall profitability. CEO Zou Tao indicated the downward trend may persist for two more quarters. Office software revenue grew 24%, but was insufficient to offset gaming weakness, creating a dual headwind from deteriorating fundamentals and capital flow disruption.

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