Hang Seng Index Hits New Year High with Six-Day Winning Streak, Tencent and Alibaba Lead Tech Rally

Hang Seng Index Hits New Year High with Six-Day Winning Streak, Tencent and Alibaba Lead Tech Rally

Hong Kong's Hang Seng Index has shown remarkable strength recently, closing higher for six consecutive trading days and reaching a new year high. Market sentiment has significantly improved, with the technology sector serving as the core engine of this rally. Heavyweights Tencent Holdings and Alibaba Group have led the charge, pushing the index past key resistance levels. Analysts point to a confluence of positive factors driving a phased independent rally in Hong Kong stocks.

1. Policy Tailwinds and Capital Inflows: Strong Momentum for the Hang Seng

The backdrop for this rally is a combination of macroeconomic factors. First, expectations for China's economic recovery continue to improve, with the latest Manufacturing Purchasing Managers' Index (PMI) remaining in expansion territory for several consecutive months, indicating more active business operations. Second, the China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) jointly announced optimizations to the Stock Connect program, further relaxing conditions for including stock ETFs under Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects, providing more allocation tools for southbound capital. According to Hong Kong Exchanges and Clearing (HKEX) data, southbound capital has been net buying recently, with daily net inflows exceeding HKD 10 billion multiple times, directly fueling the index's rise.

Additionally, growing expectations of a pause in the Federal Reserve's rate hikes have weakened the U.S. dollar index, leading to a clear trend of capital returning to emerging markets. As an offshore renminbi hub, Hong Kong benefits from the accelerated internationalization of the renminbi, improving the liquidity environment for Hong Kong stocks. After breaking through its previous year high, the Hang Seng Index has formed a bullish technical pattern, with volume expanding moderately, indicating increased market participation.

2. Tencent and Alibaba: Earnings Beats and Buyback Surge Converge

Within the tech sector, the strong performance of Tencent and Alibaba stands out. Tencent's recent earnings report showed advertising revenue growth exceeding market expectations, accelerated monetization of its video accounts, and normalization of game license issuance, all contributing to a recovery in core business profitability. Meanwhile, Tencent has continued its massive share buyback program, with daily repurchase amounts remaining at elevated levels, signaling management's view that the stock is undervalued. Market analysis suggests that Tencent's current valuation is at historically low levels, and the buyback has effectively boosted investor confidence.

For Alibaba, its first full-quarter earnings report after the organizational restructuring showed a recovery in core e-commerce revenue and narrowing losses in its cloud computing business. More importantly, Alibaba announced its first-ever annual dividend and plans to conduct tens of billions of dollars in share buybacks over the next three years. This move is interpreted by the market as management's commitment to shareholder returns, directly driving a sharp rise in the stock price. Additionally, several of Alibaba's business segments have initiated independent fundraising or listing processes, fueling expectations of asset revaluation.

3. Broad Tech Sector Recovery: AI and Internet Giants Lead the Way

Driven by Tencent and Alibaba, Hong Kong's tech sector has seen broad-based gains. Internet giants like Meituan, JD.com, and NetEase have also strengthened, with the Hang Seng Tech Index significantly outperforming the Hang Seng Index. At the industry level, artificial intelligence (AI) has become the year's investment theme. Domestic large models such as Tencent's Hunyuan and Alibaba's Tongyi Qianwen are iterating rapidly and being implemented in scenarios like ad recommendations, customer service, and content generation, injecting new growth momentum into the platform economy. According to IDC forecasts, China's AI market size is expected to exceed USD 100 billion by 2025, and Hong Kong-listed tech companies, as key AI application carriers, are poised to benefit.

Furthermore, the regulatory environment for the internet industry has stabilized. Since 2023, authorities have repeatedly expressed support for the healthy and orderly development of the platform economy and introduced multiple policies to promote the digital economy. Market concerns about regulatory risks have significantly eased, making valuation recovery a key driver for tech stock gains. Some institutions believe that the current price-to-earnings ratio of Hong Kong's tech sector remains below its five-year average, suggesting further upside potential.

4. Market Outlook: Risks and Opportunities Amid Optimistic Expectations

Looking ahead, most institutions hold a cautiously optimistic view of Hong Kong stocks. On one hand, the sustainability of China's economic recovery, the timing of the Fed's monetary policy shift, and geopolitical risks remain key variables affecting the market. On the other hand, Hong Kong stock valuations are still undervalued compared to other major global markets, and the trend of southbound and foreign capital inflows is expected to continue. As core assets in Hong Kong, the tech sector's earnings improvement and valuation recovery story has yet to fully play out. Subsequent catalysts include more internet companies reporting earnings beats, accelerated AI commercialization, and further expansion of the Stock Connect program.

However, some analysts caution that the recent sharp gains could trigger a technical correction. After the Hang Seng's six-day winning streak, profit-taking pressure has increased. Additionally, overseas market volatility and exchange rate fluctuations could also disrupt Hong Kong stocks. Investors should closely monitor changes in trading volume and movements of heavyweight stocks.

Risk Warning

The above content is for reference only and does not constitute investment advice. Markets carry risks; invest with caution. The views, data, and analyses presented in this article are based on publicly available information and are not guaranteed for accuracy or completeness. Investors should make independent judgments and bear investment risks.