Hang Seng Index Plunges Over 2% in Morning Trade, Tech Stocks Lead Decline; Tencent and Alibaba Suffer Heavy Losses

Hong Kong stocks weakened significantly in Thursday morning trade, with the Hang Seng Index falling more than 2% and breaching a key psychological level. Market sentiment deteriorated markedly, with the technology sector bearing the brunt of the sell-off. Heavyweights Tencent Holdings and Alibaba both recorded substantial losses, dragging down the broader market.

Hang Seng Index Falls Over 2% in Morning Session; Tech Stocks Under Pressure

As of the midday close, the Hang Seng Index was down more than 2%, having touched a recent low during the session. Blue-chip stocks broadly declined, with technology shares leading the losses. According to traders, selling pressure was primarily driven by concerns over slowing global economic growth and heightened geopolitical uncertainty. The Hang Seng Tech Index fell even more sharply, dropping over 3% in the morning, with nearly all constituents in the red.

Tencent and Alibaba Plunge; Heavyweights Weigh on Index

As the two largest weighted stocks in the Hang Seng Index, Tencent Holdings (00700.HK) and Alibaba (09988.HK) both fell more than 3% in early trading. For Tencent, market concerns over slowing game business growth, coupled with lingering regulatory uncertainties, made investors cautious. Alibaba was pressured by weaker-than-expected consumption recovery and rumors of intensifying competition in its cloud computing business. According to sources familiar with the matter, some institutional investors are adjusting their positions, reducing holdings in large-cap tech stocks and rotating into defensive sectors.

Reasons for the Decline: Multiple Headwinds Combine

This decline was not driven by a single factor but resulted from a confluence of negative catalysts. First, rising U.S. Treasury yields have compressed valuations for growth stocks. Second, the latest Chinese economic data showed a slowdown in manufacturing activity, raising concerns about earnings prospects. Additionally, geopolitical tensions have escalated again, fueling risk-off sentiment among foreign investors, while southbound capital inflows have narrowed significantly.

Some analysts noted that tech valuations remain at historically mid-to-high levels, and the sector may continue to face downward pressure until the interest rate environment clearly shifts. However, others argue that after the recent correction, some leading stocks have become attractive for medium-to-long-term positioning, and advise investors to focus on names with strong earnings visibility.

Market Sentiment and Outlook

Today's trading showed rising panic sentiment, with the Hang Seng Volatility Index (VHSI) climbing during the session. Notably, however, there was no large-scale outflow from the Stock Connect southbound channel, indicating that mainland investors still have some confidence in Hong Kong stocks. On the technical front, the Hang Seng Index has broken below several short-term moving averages, with the next support level likely near the previous low.

Looking ahead, the market may remain range-bound in the short term. Investors should closely monitor the Fed's policy path, Sino-U.S. relations, and the upcoming earnings season. If negative factors are gradually digested, Hong Kong stocks could find support at lower levels; otherwise, further downside is possible. Investors are advised to remain cautious, manage positions prudently, and prioritize high-dividend and defensive sectors.