Amid mutual funds accelerating their southbound investments with policy support and Middle Eastern capital rapidly flowing into the Hong Kong market, Hong Kong stocks centered on new technology and new consumption have experienced a strong rebound. On March 16, the Hang Seng Tech Index surged 2.69%, driving collective gains in sectors such as internet, new technology, and new consumption. Several industries that had undergone significant prior adjustments saw valuation recoveries. Industry insiders believe the Hong Kong stock market has traditionally been dominated by foreign capital with a cautious and pragmatic investment style, where funds often commit after full fiscal year results are confirmed. As many Hong Kong-listed companies are set to report their results collectively by the end of the month, previously观望的 institutional funds are expected to gradually enter the market. Substantial capital is accelerating its move south via mutual fund ETFs, with the units of some Hang Seng Tech ETF products surging approximately sixfold within four months.
The Hang Seng Tech rebound has boosted institutional bullish sentiment. On March 16, the Hong Kong market displayed a clear structural recovery, with the Hang Seng Tech Index acting as the core engine, rising 2.69% for the day and strongly reclaiming the 5,100-point level. The Hang Seng Tech ETF South tracking the index also rose 3.08%, with significantly increased trading activity during the session. Driven by the index, sectors heavily covered by mutual funds, such as AI, mobile internet, consumer goods, and semiconductors, performed sharply. The top ten gaining industries were mostly areas that had seen substantial prior adjustments and renewed institutional interest, with the household products sector leading with a 9.45% gain, followed by IP-driven new economy, cosmetics, semiconductor equipment, media, and supermarket retail sectors.
At the individual stock level, holdings of QDII and mainland mutual funds became the primary targets for capital inflows. Zhipu AI surged 14% for the day, Hong Teng Precision Technology, heavily held by Xinyuan Fund, rose 12%, Guo Quan, a major holding of Southern Fund, gained around 10%, Buruike, heavily held by BOC Fund, increased about 8%, while Cha Ba Dao, a key holding of Hua An Fund, and Gu Sheng Tang, held by Rongtong and Ping An Funds, both rose approximately 7%. Stocks like Mao Geping, held by Bosera Fund, Shanghai Meishi, held by Nuode Fund, and Jingtai Holdings, held by Fullgoal Fund, also advanced.
Simultaneously, stocks with leading Middle Eastern business exposure saw supporting inflows. Geek+, a leader in warehouse logistics robots, holds a strong brand position in Saudi Arabia, Dubai, and Kuwait; Ubtech recently signed a $1 billion strategic cooperation agreement with Middle Eastern investment firm Infini Capital; Chizicheng Technology, which derives over 50% of its revenue from the Middle East, also became a buy target for QDII funds, with its video social platform SUGO and game social product TopTop becoming national applications in Saudi Arabia and other Middle Eastern countries; Quanzhi Group also announced a strategic cooperation with Dubai to create a leading AI indoor entertainment space in the Middle East; IFBH, a coconut water brand with operations in Kuwait, soared 13% in a single day due to its Middle East theme, fully reflecting incremental capital's high recognition of the "Hong Kong stocks + Middle East" narrative.
Middle Eastern capital buying the dip has played a significant role in this round of Hong Kong stock valuation recovery. Hong Kong Financial Secretary Paul Chan recently stated that the trend of Middle Eastern capital increasing allocations to Hong Kong for避险 purposes is clear, and Hong Kong has prepared contingency plans. Against the backdrop of Middle Eastern geopolitical conflicts affecting global risk appetite, mutual fund managers also recognize that Hong Kong, with its status as an offshore market, low valuation advantages, and a sound financial system, has become a core destination for overseas避险 capital and long-term allocation funds. This provides solid financial support for the Hong Kong stock rebound and also underpins the logic for A-shares to seek opportunities南下.
ETFs are accelerating布局,看好 the valuation and capital floor. Whether for mutual funds or foreign institutions like those from the Middle East, the core basis for布局 the Hong Kong market is evidently its value as a洼地. Cheap valuations are the key reason for large global capital rotating into Hong Kong. After prior adjustments, the Hong Kong tech sector has entered a historical valuation bottom zone, offering both safety margins and room for recovery, which constitutes the core fundamental reason for heavy fund positioning.
As of March 16, the Hang Seng Tech Index's PE-TTM was only 21.21 times, sitting at approximately the 15th percentile historically over the past decade, meaning its valuation is lower than it was over 85% of the time. The adjustment幅度 and valuation level have both reached historical lows. Since the peak in October 2025, the Hang Seng Tech Index has accumulated a correction of 28%. Comparing globally, the valuation advantage of Hang Seng Tech is even more prominent. The Nasdaq 100 Index currently trades at a PE of around 33.14 times. The Hang Seng Tech Index trades at a discount of nearly 50% compared to the ChiNext Index and nearly 40% compared to the Nasdaq Index, leading significantly in terms of value within the global tech sector.
In terms of asset attributes, the Hang Seng Tech Index aggregates 30 large-cap, highly liquid core tech companies, covering the entire industry chain from internet platforms, cloud computing, AI large models, semiconductors, to smart hardware. It represents both the core of China's tech industry and a primary target for global investors seeking exposure to Chinese tech.
On the capital front, a dual-driven pattern of "domestic capital leading, foreign capital returning" has formed. Southbound capital has become a stabilizer for Hong Kong stocks, with net inflows of approximately HK$800 billion for the full year 2024, surging to HK$1.4 trillion in 2025, and continuing the strong inflow trend in 2026, with the Hang Seng Tech sector seeing net inflows of RMB 1.501 billion over the past seven days. Concurrently, ETF capital is accelerating its布局 in the Hong Kong tech sector, showing strong interest from mainland capital using ETF products to access Hong Kong. For example, the Hang Seng Tech ETF South has seen its units grow by 590% in less than four months since inception, indicating a consensus expectation among retail and institutional investors for a Hong Kong stock rebound.
Regarding the overall strategy and outlook for Hong Kong stocks, several mutual fund managers believe the safety margin for Hong Kong tech stocks is now sufficient, coupled with the release of annual reports following the adjustment period, suggesting potential for超额 returns. Zhang Qisi, fund manager of the Hang Seng Tech ETF South, pointed out that the current valuation advantage of the Hang Seng Tech Index is significant, with both capital and policy factors providing positive support. On the tech fundamental side, the commercialization of AI is accelerating rapidly. Driven by low valuations, capital inflows, industrial upgrading, and policy improvements, the medium-to-long-term recovery potential for Hang Seng Tech is值得坚定看好.
Zhang Qisi emphasized that the Hong Kong market adjustment since the beginning of the year was mainly driven by sentiment and overseas liquidity fluctuations, not a deterioration in fundamentals. 2026 remains within a global easing monetary cycle, with continued domestic fiscal support, creating a persistently favorable liquidity environment for the Hong Kong tech sector.
Qu Shaojie, Deputy General Manager of the International Business Department and Fund Manager at Great Wall Fund, believes that current complex international situations and disturbances from Middle East conflicts primarily affect liquidity expectations, with limited impact on Hong Kong's fundamentals. China's stable economic operation provides solid support for Hong Kong stocks. The trend of large-scale net inflows from southbound capital持续 in 2024-2025 is expected to continue in 2026, ensuring no liquidity concerns for Hong Kong stocks.
Qu Shaojie stressed that the Hong Kong market is dominated by institutional investors, where stock prices are highly correlated with fundamentals. Stock selection should focus on leading companies with stable performance, reasonable valuations, and high, stable gross margins, avoiding pure concept speculation. He stated that after deep adjustments, the downside for Hang Seng Tech Index valuations is limited. The entire AI industry chain will be the core theme for Hong Kong tech stocks in 2026. Platform companies with strong AI technology and implementation capabilities, and upstream computing power and hardware segments benefiting from AI capital expenditures, are expected to be the first to deliver results and drive a trend-based index recovery.
Against the backdrop of rising global uncertainty and capital seeking safe havens, the advantages of low valuations and high dividends in Hong Kong stocks stand out. Coupled with the gradual release of AI commercialization dividends, high-quality tech assets represented by the Hang Seng Tech Index are有望 to experience a dual recovery in both valuation and earnings.
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