Hang Seng Index Posts Second Consecutive Weekly Gain, Tech Stocks Rally Led by Tencent and Alibaba

Hong Kong Stocks Hang Seng Index Posts Second Consecutive Weekly Gain, Tech Stocks Rally Led by Tencent and Alibaba

Hong Kong's Hang Seng Index has closed higher for two consecutive weeks, signaling a notable improvement in market sentiment. Driven by the tech sector, the index has rebounded from its recent low and reclaimed a key psychological level. Tencent Holdings and Alibaba, as the two largest weighted tech stocks, have been the core drivers of this rally through their price performance and capital flows.

Technical Rebound in Hang Seng Index, Weekly Chart Improves

According to market data, the Hang Seng Index has risen over the past two weeks, forming a "two consecutive bullish candles" pattern on the weekly chart. This breaks the previous weeks of declining trend, and technical indicators such as the Relative Strength Index (RSI) have recovered from oversold territory, suggesting a reduction in short-term selling pressure. Analysts note that the index found support near its prior low, attracting bargain-hunting funds that helped stabilize the market.

In terms of sector performance, technology, consumer, and financial stocks have rotated upward, with tech stocks contributing the bulk of the gains. The Hang Seng Tech Index has posted even stronger gains over the same period, reflecting a recovering preference for tech leaders among investors.

Tencent and Alibaba Beat Earnings Expectations, Accelerating Capital Inflows

Quarterly earnings reports released recently by Tencent Holdings and Alibaba show robust growth in their core businesses. Tencent's revenue from gaming, advertising, and enterprise services exceeded market expectations, with its cost-cutting and efficiency-boosting strategies continuing to pay off, leading to an improved net profit margin. Alibaba benefited from a recovery in its e-commerce business and narrowing losses in cloud computing, with revenue growth returning to double digits.

According to public filings from the Hong Kong Stock Exchange, southbound capital has been consistently net buying Tencent and Alibaba over the past two weeks, ranking among the top net purchases via the Stock Connect. On the international front, some active funds have begun increasing their holdings in Chinese tech stocks, citing attractive valuations. Institutions such as Morgan Stanley have raised their target prices for Tencent and Alibaba in research reports, believing that their earnings inflection point has arrived.

Three Key Drivers Behind the Market Sentiment Recovery

This rebound in Hong Kong stocks is not an isolated event but the result of multiple factors converging. First, China's macroeconomic data has shown marginal improvement, with the manufacturing Purchasing Managers' Index (PMI) remaining in expansion territory for several consecutive months, boosting investor confidence in corporate earnings. Second, expectations that the Federal Reserve's rate hike cycle is nearing its end have intensified, weakening the US dollar index and easing capital outflow pressures from emerging markets. Finally, Hong Kong stock valuations are at historical lows, with the Hang Seng Index's price-to-earnings ratio below 10 times, attracting value-oriented funds to position themselves.

Notably, the tech sector's rebound has also been bolstered by a stabilizing policy environment. Regulators have recently repeatedly emphasized support for the healthy development of the platform economy and introduced specific measures to encourage technological innovation, reducing the uncertainty faced by tech companies.

Outlook: Can the Rally Sustain?

Despite the short-term optimism, there remains disagreement among the market regarding the sustainability of the rebound. Some analysts believe that after breaking through key resistance levels, the Hang Seng Index could test higher levels, provided that trading volume continues to expand. However, others point out that global geopolitical risks and uncertainties surrounding the pace of China's domestic economic recovery may limit the index's upside potential.

From a capital flow perspective, the pace of southbound capital inflows is a key indicator to watch. If net buying via the Stock Connect remains elevated, it will provide liquidity support for the market. Additionally, whether Tencent and Alibaba can maintain their growth momentum in subsequent earnings reports will directly impact the valuation recovery process of the tech sector.

Overall, the Hang Seng Index's two consecutive weekly gains mark a shift in market sentiment from bearish to cautiously optimistic. The leading roles of Tencent and Alibaba underscore the core position of tech stocks in Hong Kong's market. Investors should closely monitor macroeconomic data and policy developments to assess the sustainability of the rebound.