Hong Kong stocks mixed on Wednesday, dragged by technology heavyweights, as speculation about a higher value-added tax (VAT) weighed on sentiment.

The Hang Seng Index rose 0.05%, while the Hang Seng Tech Index fell 1.84%.

In terms of star stocks, Tencent and Bilibili fell 4%; NetEase and Laopu fell 3%; SMIC, NIO, Xiaomi, and JD.com fell 2%; Meituan fell 1%; Alibaba fell 0.9%; while Pop Mart rose 2%; Li Auto rose 3%; CATL rose 4%.

Tech giants were among major losers, as rumours persisted that Beijing could follow up an adjustment of the VAT on the telecoms sector with a similar increase for internet companies, threatening profit prospects.

“Market volatility has been driven by fear of across-the-board VAT hikes and tighter enforcement,” said Morgan Stanley analysts led by Robin Xing in a note on Tuesday, referring to worries that a higher VAT would suppress consumption and investment, reinforcing disinflation amid weak demand.

However, they found that scenario unlikely.

“Broader VAT hikes on private services are unlikely in 2026 and would run counter to reflation efforts,” they said. “We expect the fiscal stance in 2026 to remain ‘cushion, not lift’.”

US equities fell overnight, with the S&P 500 dropping 0.8 per cent and the Nasdaq sliding 1.4 per cent, as concerns grew that an acceleration in artificial intelligence investment could weigh on demand for related products, such as software. Risk sentiment was further dented by escalating tensions between the US and Iran.