Hong Kong's Hang Seng Index Rises for Third Straight Day: Tech Stocks Lead, Tencent and Alibaba Hit New Highs, Rally Drivers Analyzed

Hang Seng Index Rises for Third Straight Day: Tech Stocks Lead, Tencent and Alibaba Hit New Highs

Hong Kong's Hang Seng Index closed higher for three consecutive trading days this week, with market sentiment notably improving. Driven by heavyweight tech stocks, the index reclaimed a key psychological level, with Tencent Holdings and Alibaba both hitting recent highs, becoming the core engines of this rebound. Analysts point to a confluence of fund inflows, improved policy expectations, and solid corporate fundamentals fueling the rally.

Rally Drivers: Liquidity and Policy Tailwinds

The Hang Seng's rebound began in the latter half of last week, primarily driven by multiple positive factors. First, southbound capital continued to flow in, with data from the Hong Kong Exchange showing net purchases exceeding HKD 10 billion over the past three trading days, with the tech sector attracting significant interest. Second, market expectations for mainland China's economic stimulus measures have risen, particularly as regulatory attitudes toward the platform economy stabilize, boosting investor confidence. Additionally, renewed expectations of a Fed rate cut are driving global capital back to emerging markets, with Hong Kong stocks, as a valuation trough, attracting foreign capital.

From a technical perspective, the Hang Seng has digested previous negative factors after a continuous correction. Short-term moving averages show a bullish alignment, and trading volume is gradually expanding, indicating building upward momentum. However, some analysts caution that after breaking through previous resistance levels, the index needs sustained volume and should watch for potential disruptions from overseas market volatility.

Tech Stocks Lead: Tencent and Alibaba Hit New Highs

As the largest sector in the Hong Kong market by weight, tech stocks have been particularly prominent in this rebound. Tencent Holdings rose for three consecutive days, hitting a new high since 2024, with its total market capitalization returning above HKD 4 trillion. The market widely believes that Tencent's steady growth in core businesses like gaming, advertising, and cloud services, coupled with its ongoing share buybacks, provides strong support for its stock price. According to public information, Tencent has recently intensified its buyback efforts, with single-day repurchases exceeding HKD 1 billion at times, signaling management's confidence in the stock's undervaluation.

Alibaba also performed strongly, with its stock price simultaneously hitting a new high for the period. On the news front, Alibaba's cloud computing business announced several large corporate orders, while its international e-commerce business grew beyond expectations, leading to an upward revision in overall revenue outlook. Additionally, the market is closely watching Alibaba's plans to spin off and list its business units; if successful, it could further unlock company value. Together, these two companies contributed nearly one-third of the Hang Seng's gains, serving as the main drivers of the index's rise.

Fund Flows: Foreign Inflows and Southbound Buying in Tandem

On the liquidity front, this rally is characterized by joint support from foreign and southbound capital. According to Bloomberg-compiled data, ETFs tracking Hong Kong stocks saw net inflows of approximately USD 2 billion over the past week, with most coming from European and American institutional investors. These funds were primarily allocated to tech, consumer, and financial sectors, reflecting recognition of Hong Kong stocks' valuation repair. Meanwhile, southbound capital continued to increase positions, focusing on tech leaders like Tencent, Meituan, and Xiaomi, as well as high-dividend stocks such as China Mobile and China Construction Bank.

Notably, some hedge funds have also increased their exposure to Hong Kong stocks recently, with a significant rise in bullish options positions on tech stocks. This indicates growing optimism about the tech sector's future trajectory. However, some institutions caution that short-term fund inflows could be affected by changes in global risk appetite, and investors should be wary of profit-taking pressure.

Outlook: Focus on Earnings and Policy Pace

Looking ahead, whether the Hang Seng can sustain its uptrend hinges on the persistence of corporate earnings improvements and further clarity on the policy front. From a fundamental perspective, tech giants like Tencent and Alibaba are about to release quarterly earnings, with the market generally expecting revenue and profit growth. If actual data exceeds expectations, it could provide further upward momentum for the index. Additionally, if mainland economic data such as PMI and social financing show signs of stabilization, it will also boost confidence in Hong Kong stocks' fundamentals.

On the policy side, the market is closely watching upcoming important meetings, which are expected to introduce more measures to support the private economy and platform economy development. If such policies materialize, tech stock valuations could see further repair. However, uncertainties in overseas markets remain a concern, particularly changes in the Fed's interest rate path and geopolitical risks, which could cause periodic shocks to Hong Kong stocks.

Overall, the Hang Seng has moved away from its previous lows after consecutive gains, but the subsequent trend still needs fundamental verification. As the leading force in this rebound, the performance and market sentiment of tech stocks will directly influence the index's direction. Investors can look for pullback entry opportunities in quality leaders while managing positions to guard against short-term volatility risks.