Since October of last year, Hong Kong and A-shares have exhibited a significant divergence in performance, with the Hang Seng Tech Index undergoing consecutive adjustments.

According to Wind data, the Hang Seng Tech Index has fallen nearly 20% since October 2025. Nearly ten constituent stocks, including Kingdee International, Sunny Optical Technology, Tencent Music, and Xiaomi Corporation, have declined over 30%. Despite this downturn, more than 100 billion yuan has flowed into the Hong Kong market via ETFs, adopting a strategy of buying on dips, with total inflows reaching approximately 144.6 billion yuan.

Multiple factors have impacted the Hang Seng Tech Index. On February 20, the first trading day of the Year of the Horse in Hong Kong, the index fell 2.91%. Internet and tech stocks broadly declined, with Baidu Group dropping over 6% and Alibaba falling nearly 5%. Semiconductor stocks also weakened, with Hua Hong Semiconductor down nearly 6% and SMIC falling over 3%.

Examining a longer period, since October 2025, the Hang Seng Tech Index has dropped nearly 20%, and around ten constituents have seen declines exceeding 30%.

One fund manager suggests the recent Hong Kong market adjustment can be analyzed from both internal and external perspectives. Externally, uncertainty regarding the policy direction of a potential new Federal Reserve Chair nominee sparked market panic. Concerns arose about further tightening of global liquidity due to balance sheet reduction, and expectations for the pace of interest rate cuts may be delayed. This led to significant volatility in assets like precious metals and overseas tech stocks. The Hong Kong market, highly sensitive to overseas investor sentiment, was naturally affected. Large internet giants, with their good liquidity and heavy weighting, became a source of funds for overseas institutions needing liquidity due to deleveraging following sharp declines in precious metals and other major asset classes.

Internally, recent online rumors about potential increases in value-added taxes for the gaming and advertising sectors deepened panic amidst already weak market sentiment. However, practical calculations suggest that even if such taxes were implemented, the impact on the profits of major gaming companies would be limited and manageable.

Additionally, recent significant advancements in large language model capabilities have led some overseas investors to worry about traditional software vendors. This sentiment-driven trading has caused irrational, sharp declines for software service providers within the Hang Seng Tech Index. Pre-holiday subsidy campaigns by major companies competing for user traffic in large models also raised investor concerns about competitive landscape pressures.

Another analysis points out that domestic mutual funds' allocations to Hong Kong stocks significantly exceeded their benchmark weights, creating substantial selling pressure. This was a key narrative during the market headwinds at the end of 2025. Data shows that as of the third quarter of 2025, active equity-oriented mutual funds had assets under management of 3.59 trillion yuan. Based on their respective benchmarks, the implied holding size for Hong Kong stocks should have been 356 billion yuan. However, the actual holdings were 594 billion yuan, far exceeding the benchmark. This led some funds, constrained by new benchmark regulations, to sell Hong Kong stocks and reinvest in A-shares. Practically, southbound capital experienced rare weekly net outflows in December, corroborating this narrative and representing a significant reason for the temporary headwinds for Hong Kong tech stocks.

Concurrently, a fund manager noted that recent large model releases by companies like Zhipu and MiniMax were followed by significant share price declines for Tencent and Alibaba, which also have large model businesses. Furthermore, the "red envelope war" among several highly anticipated tech giants is seen as a drain on corporate cash flow.

Despite the continued adjustment of the Hang Seng Tech Index, over a hundred billion yuan has flowed in, buying on dips and increasing positions against the trend.

Wind data indicates that since October 2025, ETFs tracking indices like the Hang Seng Tech Index, the CSI Overseas China Internet 50 Index, and the Hang Seng Stock Connect Tech Theme Index have collectively seen net inflows of 144.6 billion yuan. Among them, three products—ChinaAMC Hang Seng Tech ETF, Huatai-PineBridge Hang Seng Tech ETF, and Tianhong Hang Seng Tech ETF—attracted net inflows exceeding 15 billion yuan each.

Analysis suggests that ETFs listed overseas which track Chinese assets have seen continuous inflows since July 2025, with cumulative net inflows surpassing $14 billion. While past inflow peaks occurred in September 2024 (policy shift) and March 2025 (the "DeepSeek moment"), those were characterized by rapid inflows and outflows. The latest round of slow, sustained net inflows validates a shift in the perception of the Chinese market from "tradable" to "investable."

One manager stated that the recent adjustments are largely due to non-fundamental factors. From a liquidity perspective, the future动向 of overseas funds仍需观察. After the recent declines, valuations for some major internet companies have fallen below 15 times P/E, making them more attractive relative to future growth expectations. For the Hang Seng Tech sector, factors such as Federal Reserve policy changes, internet regulation, and tax policies仍需观察.

According to Wind data, the absolute valuation of the Hang Seng Tech Index has reached a P/E of 21.51x, situating it at the 19.31st percentile since its inception. From a relative valuation perspective, measuring the A-H premium for the tech sector using the Hang Seng Tech Index/A-shares STAR 50 and ChiNext Index shows it is near historical lows, previously seen in March 2022, October 2022 (during rapid foreign outflows), and late 2023 (during gaming regulations). The current regulatory environment for internet companies and the economic development backdrop are significantly better than in 2022 and 2023.

Another fund manager believes that Hong Kong-listed internet, biotech, high-end manufacturing, and early-stage tech companies represent稀缺 assets compared to the A-share market. Particularly, the combination of downstream AI applications with China's vast industrial base can create significant resonance effects and demonstrate strong growth potential. Under long-term tech trends, the continuous iteration of large AI models could potentially trigger an AI application rally led by internet companies.

The past few years' investment热潮 in the Hong Kong market essentially reflects a good fit between the scarcity of Hong Kong assets and the current stage of technological development. Especially in trending tech sectors, the "gold content" of specific Hong Kong-listed targets might be higher. Furthermore, for the same industry and company, Hong Kong listings often offer cheaper valuations and better cost-performance compared to their A-share counterparts.