The first-quarter financial reports of internet companies are likely to dominate the market trends in May. Following the Labor Day holiday, influenced by geopolitical tensions, the Hang Seng Tech Index lost the 5000-point level after briefly surpassing it, leading to a volatile trading environment in the Hong Kong stock market.
Industry experts anticipate that starting from mid-May, several internet platform and technology stocks will disclose their earnings. The progress of these companies' artificial intelligence initiatives and the status of subsidies in food delivery services are expected to continue impacting the index's trajectory. Notably, Tencent Holdings (00700.HK) and Alibaba (09988.HK) are scheduled to release their first-quarter 2026 financial results on May 13.
On May 4, the Hang Seng Tech Index rose above the 5000-point mark. However, renewed tensions between the US and Iran led to a sharp decline on May 5, with the index falling over 2% at one point and dropping below 4900.
A chief executive from an investment firm noted that the index's retreat on May 5 was driven by renewed geopolitical tensions in the Middle East, reflecting a typical pattern of news-driven volatility. He suggested that southbound capital, a key support for the tech sector, has historically shown a "buying the dip" tendency after risk events. If geopolitical pressures ease, funds could accelerate their return to attractively valued tech leaders, providing positive support for the index. Conversely, persistent tensions or global liquidity tightening would likely maintain a cautious inflow pace.
He emphasized that the upcoming Q1 earnings reports represent a critical variable. Accelerated AI commercialization coupled with stable core business performance could boost growth confidence and catalyze a valuation recovery, though changes in profit margins due to food delivery subsidies also warrant close attention.
A strategist from a securities firm analyzed that recent fluctuations in tech stocks are linked to Middle East instability. With major tech firms about to announce their new quarterly results, this period's performance is expected to outperform the previous quarter (Q4 2025), reflecting mainland China's economic conditions in Q1. He believes the downside for large tech stocks is limited, projecting 4800 points as a short-term support level.
"However, compared to overseas-listed tech stocks, major Hong Kong-listed tech companies still rely heavily on traditional consumer businesses, limiting their direct benefits from the AI boom. Consequently, any subsequent valuation recovery may be relatively slow," he added.
A chief investment officer from an asset management company views the recent decline as primarily influenced by geopolitical turmoil. He does not anticipate significant unusual activity even after southbound trading resumes. He expects that, besides Middle East developments, earnings disclosures will be a core factor influencing tech stock movements. If AI-related profit expectations materialize, with constituent stocks showing clear growth in revenue, profits, and order backlogs, it could directly impact market sentiment around the AI sector, becoming a short-term focus.
An ETF fund manager specializing in Hong Kong stocks mentioned that the Hang Seng Tech Index's broad industry distribution, which includes mid-to-high-end manufacturing alongside internet companies, offers good risk diversification. With current valuations at historically low levels and considering various uncertainties, he recommends investors adopt a dollar-cost averaging strategy to gradually increase their positions.