Southbound funds begin to accumulate positions in Hong Kong-listed technology stocks.
Since the beginning of 2026, Hong Kong stocks have experienced an extremely polarized market trend:
On one side, over 70 high-dividend, low-valuation stocks have surged to historic highs, such as CLP Holdings, Cheung Kong Infrastructure Holdings, Henderson Land Development, Sun Hung Kai Properties, HSBC Holdings, Bank of China (Hong Kong), China Shenhua, and Shandong Gold Mining...
Even the real estate sector, once abandoned by the market, has hit record highs. Last week, Sun Hung Kai Properties' market capitalization surpassed HKD 400 billion for the first time in 16 years (since the 2008 global financial crisis), with year-to-date gains exceeding 50%.
On the other hand, technology sectors including semiconductors, internet, and new energy have collectively plummeted. Even core giants like Tencent, Alibaba, Xiaomi, Meituan, and Baidu have not been spared, with many seeing declines of nearly 20% in just over a month.
The intensity of this polarization has far exceeded market expectations.
The essence of investment often lies in contrarian positioning. When everyone crowds on one side, the greatest opportunities are often hidden on the other.
After this sharp decline in Hong Kong's tech stocks, new buying opportunities will soon emerge.
01
The recent surge in many high-dividend, low-valuation 'old economy' stocks can be explained clearly:
First, utility stocks have become institutional investors' preferred 'bond-like' choice.
Utility leaders such as CLP Holdings and Cheung Kong Infrastructure Holdings have maintained dividend yields between 4% and 6% over the long term, while the average dividend yield for the Hong Kong stock market is only 2.3%. In the current global low-interest-rate environment, when bond yields lose attractiveness, these assets, which offer both stable cash flows and attractive dividend yields, naturally serve as a stabilizing force and alternative for institutional funds.
Second, Hong Kong's local real estate stocks are experiencing a 'double boost' from policy dividends and valuation recovery.
With the withdrawal of stringent measures in Hong Kong's property market and a downward trend in mortgage interest rates, coupled with Goldman Sachs' recent upward revision of its forecast for this year's housing price increase to 12%, local developers represented by Henderson Land and Sun Hung Kai Properties have seen their valuations continuously recover, repeatedly hitting new historical highs. This resonance of 'policy bottom + capital bottom' has rejuvenated the long-dormant real estate sector, giving it a second spring.
Third, the energy and resources sector benefits from the dual logic of geopolitical conflicts and supply contraction.
The ongoing tension in the Middle East, combined with expectations of production cuts by major global oil-producing countries, has led to a collective surge in gold, coal, and oil-related stocks, becoming another important outlet for risk-averse funds. Shandong Gold has hit a new all-time high, while China Shenhua has also performed admirably. This 'hard asset' logic is particularly sought after during turbulent times.
Fourth, financial leaders continue to attract capital due to stabilized interest spreads and high dividend advantages.
HSBC Holdings has outperformed exceptionally—after a 73% surge last year, it rose another 13% at the beginning of this year, setting a new historical high; Bank of China (Hong Kong) has also performed well. For long-term investors seeking stable returns, the appeal of these financial leaders is self-evident.
Simply put, the common trait of these stocks can be summarized in one word: certainty.
When market risk aversion intensifies, stable cash flow and high dividends become the safest 'safe haven' for capital.
Even if growth is slower or the story less compelling, as long as dividends are received and financial reports show a bottom line, it qualifies as a good asset.
On the other hand, previously high-flying growth stocks in sectors like AI, internet, and new energy are undergoing sharp corrections in an almost brutal manner.
Among the constituent stocks of the Hang Seng Tech Index, the declines of core leading companies have been even deeper than those of ordinary stocks:
Tencent fell from its historical high of HKD 683 in October 2025 to HKD 519 on March 6, representing a decline of 24% over the period;
Alibaba's Hong Kong shares dropped from a high of HKD 186 in October 2025 to a recent low of HKD 125, with a decline exceeding 30% over the period;
Meituan’s decline has been even more severe, falling over 23% since February 2026, with a cumulative decline of 62% from its high in October 2025;
Baidu surged from HKD 120 at the end of December last year to HKD 160, but in the past one and a half months, its share price has fallen back to its original level, marking a retracement of up to 27%.
Upon analysis, it becomes clear that this extreme polarization essentially reflects a concentrated outburst of short-term capital risk aversion, rather than a fundamental reversal of long-term industry logic.
Over the past two to three years, capital allocation in the Hang Seng Tech sector has become overly crowded.
Whether overseas hedge funds or mainland Stock Connect capital, large bets have been placed on leading Hong Kong-listed tech companies.
Therefore, when everyone is crowded in the same direction, once sentiment reverses, the stampede effect amplifies declines exponentially. This negative feedback loop in capital flows far outweighs fluctuations in fundamentals.
02
As of March 6, the Hang Seng Tech Index had a price-to-earnings ratio of just 21.09 times, placing it at the 15.12th percentile of its historical range since listing.
What does this mean?
In comparison, the Nasdaq index currently has a price-to-earnings (P/E) ratio of about 30 times, while the ChiNext Index in A-shares is approximately 43 times. This means that Hong Kong-listed technology stocks are already 30% to 50% cheaper than their U.S.-listed and A-share counterparts.
This valuation level has fully priced in a substantial amount of pessimistic expectations, including macroeconomic pressures, short-term industry issues, and regulatory uncertainties. It could even be described as 'excessively pessimistic.'
However, the deep correction in technology stocks is also a process of gradually releasing risks and creating long-term opportunities through declines.
In terms of valuation, as of March 9, Tencent's trailing twelve months (TTM) P/E ratio was 20.5 times, while Alibaba's was 18.46 times. Whether considering absolute valuation or relative valuation compared to leading U.S.-listed tech giants, these figures clearly indicate no overvaluation.
There are even more severe cases, such as Meituan, which has fallen to an extreme low of 3% since its listing. It can be said that pessimistic expectations regarding macroeconomic pressure and regulatory uncertainty have been fully priced in, leaving limited room for further significant declines.
Just today, impacted by the outbreak of war involving Iran, Hong Kong stocks plummeted along with global markets. However, Meituan bucked the trend by rising 2.41%. Southbound capital inflows showed renewed strong buying, making it one of the few large-cap stocks being accumulated by investors.
While we may not yet conclude whether Meituan has bottomed out, it is undeniable that its decline has created value.
03
Reviewing the performance of Hong Kong stocks over the past two years reveals a clear pattern: after every period of extreme divergence, a reversal tends to occur quickly.
The most typical example is Alibaba.
From 2024 to the present, within a short span of two years, Alibaba's stock price has experienced at least four very clear cycles of 'sharp rise - pullback':
In April to May 2024, it rose nearly 30%, followed by an 18% drop in June;
From July to September, it surged 61%, followed by a 30% decline from October to December;
From January to February 2025, it climbed 70%, followed by a 25% drop from March to July;
From July to September, it jumped 76%, followed by a 24% correction from October to date.
With each cycle, the bottom of Alibaba’s stock price has visibly risen, and the transition between cycles has been lengthy with significant fluctuations.
If you look at Tencent, the situation is essentially the same, just not as pronounced.
This sufficiently reflects the market's 'pendulum law' — styles always swing back and forth between growth and value, optimism and pessimism.
Objectively speaking, most companies in the Hang Seng Tech Index, especially BAT, represent some of China’s top-tier giants.
The sharp decline seen recently may also be attributed to the recent frequent AI bubble-bursting events in the U.S. stock market, coupled with significant attention gained by some new domestic AI companies going overseas to issue 'tokens,' leading to market concerns that these Hong Kong-listed tech giants might lose their market share.
But in fact, this is an overreaction by the market.
Because the current AI competition is more like a 'game for giants'.
Even against the backdrop of rapid AI iteration, it is not easy for new companies to replace established players, and could be said to be extremely difficult.
This is because the moats of top technology giants are incredibly high. Not only does building AI infrastructure often require investments of hundreds of billions, which ordinary companies cannot match, but it also demands strong control over the supply chain for computing chips, as well as access to data resources accumulated over years through various scenarios and users.
These barriers ensure that large companies have an absolute advantage in terms of capital and resources. For new companies to catch up, they would need to compete not only on technology but also on their ability to burn cash, which they fundamentally lack.
More importantly, leading Hong Kong-listed tech companies have not been left behind in this wave of AI advancements.
For instance, Tencent's HunYuan large model is being rapidly deployed across multiple business scenarios, Alibaba’s Tongyi Qianwen has started empowering its cloud business and contributing incremental revenue, and Baidu’s Wenxin Yiyan has already been reflected in financial reports as an increase in AI revenue share.
While these efforts may not yield significant financial returns in the short term, in the long run, their competitive moats are gradually deepening.
Additionally, from a fundamental perspective, there is another signal that has been largely overlooked by the market: Earnings per share of the Hang Seng Tech Index showed signs of stabilizing and rebounding in Q3 2025.
Tencent’s advertising revenue has resumed growth, with significant commercial success seen in Video Accounts and mini-programs.
Alibaba's cloud business has started contributing stable profits, with adjusted EBITDA being positive for multiple consecutive quarters.
Baidu's AI business revenue share has significantly increased, with commercialization of smart cloud and autonomous driving accelerating.
Meituan's in-store business and instant delivery continue to demonstrate resilience, with the competitive landscape stabilizing.
More importantly, southbound funds are currently taking the opportunity to buy on dips against the market trend.
Today, southbound funds recorded a rare daily net inflow of HKD 37.213 billion, setting a new historical high.
Based on the afternoon trading performance of Hong Kong stocks and post-market data, apart from net purchases of technology-heavy funds such as the Tracker Fund and CSOP Hang Seng Tech ETF, the largest net purchases of individual stocks were Tencent, Xiaomi, and SMIC, clearly indicating that these tech stocks were the primary targets for bottom-fishing.
Historical data shows that every large-scale bottom-fishing by southbound funds occurs after significant declines in tech stocks; conversely, following sharp rallies, the pace of southbound fund purchases tends to slow, or even results in net selling.
Today’s record-breaking bottom-fishing scale is already a very clear and strong signal!
04
Since the beginning of this year, U.S. stocks have continued to experience high volatility, while Japanese and Korean stock markets have seen substantial increases, with valuations now at relatively high historical levels.
In the future, these markets could indeed face significant fluctuations. Coupled with the rapid evolution of the conflict in the Middle East, the global investment environment is evidently becoming more complex.
However, Chinese assets remain among the cheapest and most stable in the global mainstream market today.
We must firmly believe that the revaluation of China's technology sector will continue. Their recent sharp declines are more a result of short-term sentiment and liquidity pressures rather than systemic deterioration in fundamentals.
When everyone crowds to one side, the greatest opportunity often lies on the other side.
When the market collectively abandons tech stocks, it may be precisely the time for us to pick them up.
Let me add another point.
In August 2023, when the market was aggressively chasing utility sectors such as coal and electricity, Tencent and Meituan hit rock bottom; however, in the following two months, tech stocks rebounded violently by more than 50%.
In October 2024, when banks and real estate were favored by capital, Alibaba and JD.com were mercilessly abandoned; however, just one month later, tech stocks made a strong comeback with equally impressive gains.
This time, I believe history will soon repeat itself.
