Hong Kong technology stocks experienced a sudden, sharp sell-off. After an early surge on February 3rd, the Hong Kong stock market abruptly plunged. Around 10:50 AM, the Hang Seng Tech Index saw its losses widen to 3.37% at one point; by the midday break, it had pared some losses but remained down 1.31%.
Kuaishou plummeted over 7% at its lowest, while Bilibili, Baidu, and Tencent Holdings each dropped more than 6%. Alibaba also fell nearly 5% intraday. So, what exactly happened?
Amid the sharp decline in Hong Kong tech stocks, a rumor concerning taxation continued to gain traction. Some analysis suggests this type of speculative "market chatter" has circulated many times in previous years (various versions have emerged since 2019, none materializing), and it is being closely monitored. Given the current policy stance supporting industry development, any policy implementation would likely be very cautious.
The sudden crash occurred on February 3rd during the morning session. Initially following stronger global markets, the Hang Seng Tech Index abruptly nosedived after 10:00 AM, with internet giants collectively tumbling. Kuaishou led the decline, falling over 7%, while Baidu Group, Bilibili, and Tencent each dropped more than 5%. The Hang Seng Tech Index itself fell over 3.1% at one point.
The sell-off in Hong Kong stocks also dragged down the A-share market. The STAR 50 Index and the Science and Technology Innovation AI Index experienced significant plunges, and the Shanghai Composite Index briefly turned negative. Although the market initially had over 4,000 rising stocks, the atmosphere became tense. A-shares like Century Huatong also saw sharp declines, and the Gaming ETF erased nearly all its earlier 4% gains.
The primary driver behind the market sell-off was indeed the "taxation" rumor. As internet giant stocks plummeted, widespread speculation emerged regarding "China adjusting the criteria for high-tech enterprise certification and related new tax policies." Analysts believe this type of market chatter is not new; foreign media reported similar stories last year, which also failed to materialize. Continued monitoring is necessary, but policy implementation is expected to be cautious.
Huachuang Securities views the aforementioned rumor as excessive speculation lacking solid factual basis. Furthermore, increasing taxes on internet companies could be directly passed on to end consumers, which contradicts the current major policy direction of stimulating consumption, making the logic behind such a move untenable.
How will Hong Kong stocks perform? Data shows that as of January 30, 2026, the Hang Seng Index's PE and PB ratios were 12.47x and 1.27x, respectively, placing them at the 82nd and 63rd percentiles since 2010. The 10-year US Treasury yield rose 2 basis points from the previous Friday to 4.26%, resulting in a risk premium for the Hang Seng Index of 3.76%, which is -1.96 standard deviations from its 3-year rolling average, at the 2nd percentile since 2010. The 10-year Chinese government bond yield fell 1.86 basis points from the previous Friday to 1.8112%, leading to a risk premium for the Hang Seng Index of 6.21%, or -1.87 standard deviations from its mean (3-year rolling), at the 36th percentile since 2010. The Hang Seng Stock Connect AH Premium Index is at the 13th percentile level since 2014. Currently, Hong Kong stock valuations are not particularly high.
China Galaxy Securities believes the technology sector remains a medium to long-term investment theme. Benefiting from multiple positive factors such as supply chain price increases, import substitution, and accelerated AI application deployment, the sector is expected to experience volatile upward movement. GF Securities also noted that with the global US dollar cycle past its peak and in a downward phase, and the Renminbi having undergone depreciation adjustment to enter a mild appreciation trend, coupled with foreign capital returning and a shift from valuation repair to earnings-driven performance, Chinese equity assets are in a relatively favorable repricing window. For allocation, it is recommended to embed currency logic into asset strategy.
Comments