The Hang Seng Tech Index has declined for more than seven consecutive months, dropping another 2.15% on May 21 with a turnover of HKD 86.8 billion. Since hitting a low of 6715 points on October 2, 2025, the index has consistently underperformed, showing a pattern of "falling with declines but not rising with gains" compared to both A-share markets like the ChiNext and STAR boards, as well as overseas tech stocks.
Key constituents such as TENCENT (00700.HK) and Bilibili (09626.HK) hit new recent lows on May 21, dragging down the index. On the morning of May 22, the Hang Seng Tech Index rebounded by 2.09%, closing at 4868 points with a half-day turnover of HKD 35.53 billion.
Industry insiders suggest that as the first-quarter earnings reports for the remaining few constituents are finalized by the end of May, uncertainties will gradually diminish. If improvements are seen in the food delivery businesses of internet companies, coupled with the gradual commercialization of AI applications and potential adjustments to index constituents, there may be opportunities for a bottoming rebound in June.
Behind the "Falling with Declines but Not Rising with Gains" The underperformance of the Hang Seng Tech Index is attributed to internet companies' reliance on food delivery services and the investment phase of AI businesses, leading to lackluster performance over the past seven months.
Ronald Wan, CEO of Primavera Capital International, noted that the Hang Seng Tech Index has remained weak recently, fluctuating between 4700 and 5000 points in late May. Its tendency to "fall with declines but not rise with gains" relative to A-shares stems from greater exposure to overseas capital flows, exchange rate fluctuations, and geopolitical risks. The high weighting of consumer internet stocks in the index, combined with subsidies in food delivery and pressure from AI-related capital expenditures, has led to adjustments in internet companies. With the密集 disclosure of first-quarter earnings, uncertainties are gradually easing. Although profit expectations for 2026 have declined, some AI and cloud businesses have shown strong growth. There is potential for stabilization and a corrective rebound in June, given historically low valuations and potential index optimizations. However, a trend reversal will require improved external risk appetite and more signals of AI business commercialization. In the short term, the index is likely to remain volatile, making it suitable for分批买入 at low points.
Li Zeming, Chief Investment Officer of Blue Water Capital Management Limited, highlighted that recent market uncertainties stem from macro factors such as the U.S.-Iran situation, prolonged high oil prices, inflation concerns, and central bank policy expectations, which are the primary drivers of market volatility. The release of first-quarter earnings reports has had limited impact on stock prices, particularly for major tech and internet stocks.
Wu Lixian, a strategist at Everbright Securities International, analyzed that the overall weak performance of Hong Kong-listed tech stocks is partly due to earnings factors. After the quarterly earnings announcements, there may be some improvement, especially for large-cap tech stocks, which have limited downside at current levels. A recovery in large-cap tech stocks is expected to significantly influence the overall market.
Most index constituents have already released their first-quarter earnings. Upcoming reports include Xiaomi Group (01810.HK) on May 26, XPeng (09868.HK) and Li Auto (02015.HK) on May 28, and Meituan (03690.HK) on June 1.
Impact of Constituent Adjustments? Hang Seng Indexes Company is set to announce the results of its 2026 first-quarter review this weekend, with changes to constituents taking effect on June 8, 2026.
Wan stated that the June index adjustment is a critical window. Market expectations include the inclusion of AI-related newly listed stocks and the removal of some traditional software companies to increase the index's "AI content." This is expected to attract passive fund inflows of USD 1.2 to 1.8 billion, directly benefiting newly included stocks. Such adjustments could enhance the index's ability to capture AI trends, improve its lagging image, attract growth-oriented capital, and boost long-term resilience. Structurally, the shift from "large and diverse" to higher AI purity may increase short-term volatility. Risks include high valuations of newly listed stocks and potential pressure from share lock-up expirations, as well as dilution of traditional heavyweight stocks.
Li noted that constituent adjustments might include recently listed upstream AI semiconductor companies or some large model enterprises, though the probability is relatively low. Hang Seng Indexes Company tends to be conservative in its adjustments, exercising caution with newly listed companies lacking a track record. Even if included, their impact on the index would be limited due to their low weighting relative to free-float market capitalization. Although the total market capitalization of these upstream AI stocks may reach hundreds of billions of Hong Kong dollars, their free-float market capitalization is currently very low, often less than 10% of the total. Thus, their inclusion would have minimal effect on the overall index.
Wu added that some large model stocks may have a chance to be included in the Hang Seng Tech Index, though the final arrangements by Hang Seng Indexes Company remain to be seen. If more AI-related large model stocks are included, it could help balance the current bias toward consumer-focused tech stocks, which would be a positive signal for the market.
Yu Fenghui, an advisor at the Hong Kong Stock 100 Research Center, believes that potential adjustments to constituents, particularly the inclusion of more AI-related newly listed stocks, could introduce more dynamic and growth-oriented members into the index, potentially improving its overall performance. The addition of AI-related enterprises, which often represent emerging technologies and innovation, could enhance the industry distribution of the Hang Seng Tech Index and increase its appeal to investors. However, this would require index funds to adjust their portfolios accordingly, potentially causing short-term market fluctuations. In the long run, such adjustments by Hang Seng Indexes Company help maintain the index's competitiveness and representativeness, though investors should also monitor the quality of new members.
