A recent online survey caught significant attention, asking how people first learned about the Hang Seng Tech Index. Options included "recommended by a friend," "platform suggestion," and "discovered by chance," but the most frequent response was "sabotaged by an enemy." This sentiment is understandable given the index's performance data. From its peak last October, the Hang Seng Tech Index has retreated nearly 20%, and its performance since the start of 2026 ranks among the lowest of major global asset classes.
The concept of a "technical bear market" refers to a situation where an index declines 20% from a recent high but is not yet confirmed as a full bear market. This signals a "cautious zone," prompting investors to reassess risks, though it does not necessarily indicate a long-term trend reversal.
Recall that early last year, during the A-share market's Lunar New Year holiday, foreign capital rushed into Hong Kong stocks, buying constituents of the Hang Seng Tech Index. These companies, once seen as representing China's most advanced technological productivity, were expected to lead a narrative of repricing for Chinese tech assets. Now, just a year later, the sentiment has shifted dramatically.
A recent article from China International Capital Corporation (CICC) offered an interesting perspective. The report, aptly titled "Hang Seng Tech: The End of an 'Old Era' or a New Starting Point for Value Investing?", noted that looking solely at the index's trend, one might hardly sense the vigorous repricing driven by the AI era. Instead, there is an illusion that tech assets are entering a bear market.
A key point raised by CICC is the high concentration of the Hang Seng Tech Index. It comprises only 30 constituents, with the top ten holdings accounting for nearly 70% of its weight. This means that minor fluctuations in the stock prices of giants like Alibaba, Meituan, Xiaomi Group, and Tencent Holdings can cause significant waves in the index.
However, the fundamental pressures on the Hang Seng Tech Index stem from both internal and external challenges. Internally, there are issues reminiscent of outdated marketing strategies from a past century. Key events include negative growth in new energy vehicle sales and intensifying competition among internet platforms. Notably, the 2025 "food delivery war" led to substantial losses for Meituan and a sharp profit decline for Alibaba, severely impacting market confidence. CICC also highlighted that the pre-Lunar New Year "red envelope and milk tea" marketing battles were interpreted by the market as short-term KPI-driven actions, even mocked as antiquated "old-school marketing."
If internal issues form the core logic of endogenous pressure, external challenges act as the trigger for the persistent decline. Since last October, the "hard tech" credentials of Hang Seng Tech constituents have faced increasing skepticism. Around the Lunar New Year, ByteDance's Seedance 2.0 went viral, leading to a密集的创新爆发期 for domestic AI applications. CICC estimates that Seedance 2.0's robust business layout directly competes with nearly 40% of the index's weighted constituents, leading some to jest that the Hang Seng Tech has become a "victim alliance" of ByteDance. CICC summarized this industry shift succinctly: "Beyond ineffective internal competition, the astonishing innovation of new AGI forces is pushing the Hang Seng Tech Index into a corner."
Despite these challenges, there remains interest and confidence in the Hang Seng Tech Index. A fundamental belief is that good assets also need attractive prices. While a lack of AI imagination might make some want to abandon the index, its "low valuation" could be a reason for others to stay. CICC points out that compared to tech assets in the A-share, Hong Kong, and US markets, the Hang Seng Tech Index's dynamic price-to-earnings ratio stands at just 22 times after the 2025 rally. This is significantly lower than the ChiNext Index's 42 times, the STAR 50 Index's 167 times, and the Nasdaq's 41 times. Furthermore, it is in the 24th percentile of its historical valuation range over the past decade, indicating relative undervaluation.
Additionally, the AH premium for the tech sector, measured by the Hang Seng Tech Index relative to A-share innovation indices, is near historical lows. Previous lows occurred in October 2022, during rapid foreign outflows under the "Anything but China" narrative, and in late 2023, following new online gaming regulations. The current regulatory and economic development environment for internet companies is noticeably better than in those periods.
There are also potential improvements in liquidity. By the end of 2025, mutual funds' allocation to Hong Kong stocks was significantly above benchmark levels, creating substantial selling pressure. Currently, the scale of this over-allocation has shrunk considerably, suggesting that net selling driven by benchmark excess may be concluding. On the international front, the Federal Reserve's balance sheet reduction faces strong headwinds, making a substantive reversal of the weak US dollar logic unlikely. Should the US dollar index begin to decline, Hong Kong stocks could benefit from improved liquidity expectations.
As Charlie Munger famously said, "The noise of others is theirs; I have my own rhythm." When an asset becomes a hot topic on every street corner, it may be time to警惕风险是否过高. Conversely, when an asset experiences continuous decline, even to the point of widespread pessimism, it might signal an approaching bottom, warranting a fresh look at its allocation value. This logic appears sound.
