For stock trading, check the Jin Qilin analyst research reports 鈥?authoritative, professional, timely, and comprehensive, helping you uncover potential thematic opportunities! Source: Xingtu Financial Research Institute.
During the October A-share holiday period, compared with other major overseas equity indices, the Hong Kong stock market overall performed relatively weakly, with notable divergence among internal sectors, and market concerns about the subsequent trend of Hong Kong stocks heated up somewhat.
Especially on the first trading day of the holiday, Hong Kong stocks showed clear adjustment, with both the Hang Seng Index and the Hang Seng Tech Index falling sharply, and market risk appetite came under some pressure.
Specifically, October 2, as the first trading day of October, saw the Hang Seng Index fall 2.60% and the Hang Seng Tech Index fall 2.26%, with the Hang Seng Tech Index even breaking below its low since January 2025.
In fact, judging from recent market performance, the trend of Hong Kong stocks has clearly been weaker than that of some major overseas equity markets.
Pressure at the index level comes from a combination of factors including the overseas interest rate environment, Hong Kong's own industry structure, capital trading characteristics, and earnings expectations.
First, Hong Kong stocks are relatively sensitive to the overseas interest rate environment, especially changes in long-term U.S. interest rates.
As an offshore market, Hong Kong's capital pricing and liquidity environment are closely linked to global capital markets, so changes in U.S. Treasury yields are easily transmitted to the Hong Kong stock market through channels such as valuation, funding costs, and risk appetite.
When long-end U.S. rates continue to rise, the increase in the risk-free rate puts pressure on equity asset valuations, while also increasing the appeal of allocating funds to dollar assets, thereby disrupting Hong Kong stock liquidity.
On October 1, long-term U.S. bond yields rose again, becoming one of the important external triggers for the subsequent marked adjustment in Hong Kong stocks.
Against the backdrop of still-weak fundamental recovery in Hong Kong stocks, valuation pressure brought by rising overseas rates is more easily amplified by the market.
Especially for Hong Kong stocks that had already undergone a relatively long period of adjustment and where market risk appetite was relatively cautious, a marginal tightening of the external liquidity environment further suppresses investors' willingness to allocate to high-valuation and high-beta assets.
Second, from the perspective of market structure, Hong Kong stocks differ markedly from markets such as South Korea, Japan, and China's Taiwan region.
Hong Kong stocks have a relatively high proportion of traditional industries such as finance and consumption, while the weight of tech growth directions such as AI hardware in the index is relatively limited.
Therefore, at a time when global capital markets are pricing around the AI industry chain and the tech sector has become the main carrier of risk appetite, the overall elasticity of the Hong Kong stock index is relatively limited.
This point is especially evident in the recent performance of major overseas markets.
Taking China's Taiwan stock market as an example, TSMC accounts for about 40% of the Taiwan stock market's capitalization, and its share price has a strong driving effect on the index.
As global demand for AI computing power continues to grow, demand for advanced process nodes remains strong, and TSMC benefits from both volume and price factors, with its share price continuing to hit new highs and driving the overall strength of China's Taiwan stock market.
By contrast, although the Hong Kong stock market also has growth assets such as internet and technology, the weight of AI hardware-related assets in the overall market is still relatively limited, so there is some dilution when the overseas tech rally is transmitted to the Hong Kong stock index.
U.S. stocks have likewise shown clear structural divergence.
Recently, the Nasdaq index once again broke through a record high driven by AI tech stocks, while the Dow Jones Industrial Average has fallen more than 6% cumulatively since August.
At present, in global equity markets, the performance divergence between AI assets and non-AI assets is obvious.
For Hong Kong stocks, because the proportion of AI hard tech is relatively low, and traditional industries such as finance and consumption have also performed modestly against the backdrop of weak domestic demand recovery and pressure on profit growth, the overall index performance has likewise been dragged down to some extent.
At the same time, the closure of Stock Connect during the holiday was also an important factor causing a marked shrinkage in Hong Kong stock market turnover and an amplification of short-term volatility.
Southbound capital has become an important source of incremental funds for the Hong Kong stock market.
Data shows that in the first half of 2026, the average daily turnover of Stock Connect was about HK$123.1 billion, accounting for 22% of Hong Kong market turnover.
For some tech stocks, the proportion of Stock Connect trading even exceeded one-third.
Therefore, the temporary closure of Stock Connect significantly changes the market's daily trading structure, and especially for tech stocks with high southbound participation, liquidity will be greatly affected.
On October 2, in the absence of southbound capital participation, Hong Kong stock turnover further shrank sharply to HK$145.8 billion.
After market trading activity fell noticeably, the depth of buy and sell orders weakened accordingly, and the ability to absorb marginal selling declined; with risk appetite already weak, even a relatively small outflow of funds could trigger larger share price fluctuations.
Therefore, the clear decline in Hong Kong stocks on October 2 was affected not only by factors such as rising long-end overseas rates and weak market sentiment, but also by the absence of southbound capital during the holiday and the marked decline in market liquidity.
Overall, the recent weak performance of the Hong Kong stock index is the result of a combination of factors including the overseas interest rate environment, market industry structure, domestic demand fundamentals, and capital trading structure.
In particular, against the backdrop of strong global tech sector performance, Hong Kong's relatively low proportion of AI hardware makes it difficult for the index to fully benefit from the global tech rally; at the same time, the relatively limited profit recovery in traditional heavyweight sectors such as finance and consumption further weakens the index's overall upward momentum.
However, as marginal changes appear in the overseas market environment, Hong Kong's tech sector has recently shown some signs of repair.
Late last Friday, U.S. nonfarm payroll-related data came in weaker, easing market concerns about further Federal Reserve rate hikes; at the same time, overseas tech sectors continued to receive capital support, U.S. tech stocks rose again, and the Nasdaq index broke through a record high at one point during the session.
Driven by the recovery in risk appetite for overseas tech stocks and marginal improvement in U.S. monetary policy expectations, global tech assets overall saw a certain degree of repair.
Related changes were also quickly transmitted to Asian markets.
Today, both the Japanese stock market and China's Taiwan stock market repaired markedly, with tech stocks leading the performance.
Japanese stocks rose 2.40%, breaking out of the consolidation range since mid-June; China's Taiwan stock market rose 2.55%, once again breaking through a record high.
The strong performance of overseas tech sectors further strengthened the market's risk appetite for tech growth directions.
Against this backdrop, Hong Kong's tech sector also staged a rebound, with PCB, optical communications, and semiconductors leading the gains.
As of now, the Hang Seng Index is up 0.05%, and the Hang Seng Tech Index is up 0.46%.
Judging from market performance, Hong Kong's tech sector has begun to reflect the positive impact of the overseas tech rally, and short-term market sentiment has improved compared with earlier.
For the subsequent Hong Kong stock market, it should be noted that although improved overseas tech sentiment can provide some support for Hong Kong's tech sector, Hong Kong's own fundamentals still determine the room for further index gains.
With a relatively low proportion of AI hardware-related assets and relatively weak recovery in domestic demand sectors, the Hong Kong stock market still has fairly obvious fundamental divergence.
At the same time, if long-end U.S. Treasury yields remain high or even rise further, Hong Kong stocks, as an offshore market, will still be susceptible to changes in the global liquidity environment.
Therefore, the subsequent Hong Kong stock market is more likely to present structural opportunities rather than a broad-based rise.
As U.S. nonfarm payroll data weakens, market expectations for further Federal Reserve rate hikes have diminished somewhat; if this trend continues, it will help ease the pressure from the overseas liquidity environment on Hong Kong stock valuations.
At the same time, if overseas tech sectors remain strong, they are also expected to support Hong Kong tech assets through channels such as the industry chain, risk appetite, and capital sentiment.
On the other hand, after the National Day holiday ends, Stock Connect trading will resume, and the liquidity contraction previously caused by the absence of southbound capital is expected to be repaired to some extent.
As funds flow back in, Hong Kong stock market trading activity is expected to increase, and the tech sector, driven by the overseas tech rally, is also expected to repair together with the A-share tech sector.
However, from a longer-term perspective, the Hong Kong stock market is still constrained by its own fundamentals.
With domestic demand recovery strength, corporate profit growth, and the overseas interest rate environment not yet comprehensively improved, the basis for a sustained one-way upward move at the index level remains relatively weak.
Therefore, in the subsequent Hong Kong stock market, it is more appropriate to focus on structural opportunities.
In terms of investment strategy, a relatively balanced "barbell" allocation approach can still be adopted: at one end, focus on AI hard tech directions such as semiconductors, PCB, and optical communications that benefit from the global tech industry trend; at the other end, focus on dividend sectors with stable cash flow, strong profit resilience, and relatively high dividend yields, in order to reduce portfolio risk caused by fluctuations in a single style.
[Note: Markets carry risks, and investment requires caution. Under no circumstances should the information contained in this subscription account or the views expressed be regarded as investment advice for anyone.]
Comments