The battle between bulls and bears, led by figures like Michael Burry, is intensifying in the Hong Kong stock market, with optimistic sentiment gathering momentum.
Michael Burry, the investor famed for accurately predicting the 2008 U.S. subprime mortgage crisis and depicted in the film "The Big Short," has recently stated publicly that now is a "perfect time" to hunt for cheap stocks in the Hong Kong market. His bullish stance is based on an expectation that the global frenzy for AI chip stocks will cool, predicting capital will flow out of South Korea, Japan, and the semiconductor sector to seek undervalued opportunities.
Simultaneously, Wang Yajun, head of Asia ex-Japan Equity Capital Markets at Goldman Sachs, has pointed out that the Hong Kong market has already entered the AI era in substance, a reality not yet reflected in its major indices.
These perspectives from different angles converge on a common conclusion: there is a significant divergence between the current weak performance of Hong Kong stocks and the underlying vitality within the market, and this divergence itself may constitute an investment opportunity. For investors seeking undervalued assets, the appeal of Hong Kong stocks is rising.
Burry Bullish on Hong Kong: A Value Play Post-AI Hype
Michael Burry, founder of Scion Asset Management, posted on platform X on July 17th, stating, "Now is a perfect time to look for cheap Hong Kong stocks, which should do well as South Korea, Japan, and SOXX (the semiconductor ETF) fade."
Burry's comments come with market context. Global chip stocks have recently faced substantial selling pressure, as doubts grow over whether AI companies can translate technological investments into actual profits. Combined with high capital expenditure pressures, this has weighed on the previously leading semiconductor sector. In contrast, Hong Kong stocks' decline this year has made their valuations relatively more attractive.
It is noteworthy that Burry had already taken action earlier this month—according to Bloomberg, he increased his stake in Chinese e-commerce giant JD.com and established new positions in DraftKings and Flutter, indicating his bullish stance on Hong Kong and related Chinese stocks is more than just talk.
Hong Kong Market Lags Significantly Behind Global Peers
Data clearly illustrates Hong Kong's relative weakness. The Hang Seng Index has fallen approximately 7% year-to-date, while the Hang Seng Tech Index has tumbled a deeper 15.22%, dragged down by factors including weak consumer spending and insufficient market confidence in the prospects of China's e-commerce sector.
This stands in stark contrast to the strong performances of other major global markets. According to Bloomberg data, South Korea's benchmark index has surged 62% this year, buoyed by robust performances from its two chip giants; Japan's Nikkei 225 has risen 26%; and the iShares SOXX ETF, tracking the semiconductor sector, has skyrocketed 76%.
It is precisely this significant underperformance that leads Burry to believe Hong Kong stocks present a bargain-hunting opportunity—as global capital begins to re-evaluate the sustainability of the AI boom, previously overlooked Hong Kong stocks may see a catch-up rally.
Goldman Sachs: Index Distortion, Hong Kong Already in AI Era
Goldman Sachs' perspective offers another dimension of interpretation—the market's weakness is, to some extent, a "false impression" caused by the structural lag of its indices.
Wang Yajun, head of Asia ex-Japan Equity Capital Markets at Goldman Sachs, stated directly at a recent media briefing that the Hong Kong market has entered the AI era, but major stock indices have yet to reflect this reality, which is the fundamental reason for the "polar opposites" of a hot IPO market and sluggish index performance.
Wang pointed out that the most active topic in the Hong Kong market this year is AI, with AI-related stocks being the most actively traded, best-performing, and largest in fundraising. However, adjustments to index constituents take considerable time, leading to a mismatch between the indices and the market's true landscape. He anticipates that the total equity fundraising in the Hong Kong market this year could hit a record high, with full-year IPO proceeds potentially surpassing the historical peak of 2021, and more AI companies are expected to list in Hong Kong in the second half.
On the fundamental outlook, Wang believes that, supported by end-demand growth, capital expenditure by AI companies will continue, providing a foundation for the long-term performance of related sectors.
Multiple Bullish Voices Gather, Yet Divergence Remains
Burry is not alone. According to Bloomberg, Morgan Stanley recently also urged investors to buy Hong Kong stocks, citing reasons including optimism about corporate earnings prospects and the belief that the impact from share lock-up expirations will be relatively limited.
However, the bullish thesis for Hong Kong stocks is not without challenges. The Hang Seng Index's decline this year reflects persistent market concerns about the pace of China's consumption recovery and the profitability of the e-commerce sector—structural pressures unlikely to dissipate completely in the short term. The "mismatch between indices and the market" described by Goldman's Wang also implies that ordinary investors relying solely on indices as a reference may both underestimate the structural opportunities within the Hong Kong market and overlook the pressures still facing traditional heavyweight stocks.
For investors, Burry's buy-the-dip signal and Goldman's AI narrative together sketch a picture of opportunity in the Hong Kong market. Yet, the core challenge remains how to precisely position between overall index pressure and structural bright spots.
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