Hang Seng Index Rallies for Fourth Day to Reclaim 18,000 as Tech Stocks Lead—Can the Momentum Last?

Hong Kong's Hang Seng Index has risen for four consecutive trading days, reclaiming the 18,000-point mark as market sentiment improves notably. The rebound is led by tech heavyweights, with major internet companies like Tencent and Alibaba posting strong share price gains, lifting the broader index quickly off its recent lows. Investors are closely watching whether this rally can be sustained and whether capital flows will provide sufficient support going forward.

Tech-Led Rally: Valuation Repair and Improved Earnings Expectations

The core driver of this Hang Seng rebound is the tech sector. Tencent Holdings and Alibaba, as the two largest weighted constituents of the Hang Seng Index, have a significant impact on the index's movement. According to market analysis, the tech rally is based on three key factors:

• Valuations at Historic Lows: After a prolonged correction, the Hang Seng Tech Index's price-to-earnings ratio has fallen to multi-year lows, with some leading companies trading at valuations even lower than their US-listed peers, attracting value-oriented funds to build positions.
• Improved Earnings Expectations: Several tech companies' recent quarterly reports show effective cost controls and improved profit margins. Meanwhile, new business segments such as cloud services and artificial intelligence are growing strongly, offering upside potential for future performance.
• Stabilizing Policy Environment: Regulators' supportive stance toward the platform economy is becoming clearer, easing market concerns about policy risks. This has boosted risk appetite and prompted capital to flow back into the tech sector.

Capital Support: Southbound Flows and Foreign Inflows

Liquidity conditions in the Hong Kong stock market are crucial to determining whether the rally can continue. Recently, southbound capital has been consistently net positive, with mainland investors increasing their holdings of tech stocks through the Stock Connect, providing steady buying support. According to data from the Hong Kong Stock Exchange, southbound funds have recorded net purchases for several consecutive weeks, with notable increases in stocks like Tencent and Meituan.

At the same time, overseas funds are showing signs of returning. Expectations of a shift in the US Federal Reserve's monetary policy have risen, the US dollar index has weakened, and emerging market assets have become more attractive. Several international investment banks have upgraded their ratings on Hong Kong stocks in recent reports, arguing that the valuation discount combined with an earnings recovery will attract global allocation funds back to the Hong Kong market.

Outlook: Rebound Momentum and Potential Risks Coexist

Market views are divided on whether the tech rally can continue. Optimists argue that after reclaiming the 18,000 mark, the technical picture has strengthened. If trading volume continues to expand, the index could challenge higher resistance levels. Additionally, catalysts such as AI application adoption and consumer recovery remain supportive, and tech sector earnings have high elasticity, which could underpin further valuation repair.

Cautious voices point out that this rebound is more of a oversold bounce, and fundamentals have not seen a fundamental reversal. Global macroeconomic uncertainty persists, geopolitical risks remain, and intensifying competition in the tech industry could compress profit margins. Moreover, if the Fed's pace of rate cuts falls short of expectations, renewed global liquidity tightening could weigh on Hong Kong stocks.

Conclusion: Watch Volume Changes and Leader Earnings

In summary, the Hang Seng's four-day rally back to 18,000 is the result of multiple positive factors converging. Tech stocks, as the leading force, will see their future trajectory depend on earnings delivery and the sustainability of capital flows. Investors should closely monitor volume changes, earnings guidance from leading companies, and the Fed's policy path. In an optimistic scenario, if southbound flows remain net positive and foreign capital continues to return, the tech rally could deepen; conversely, if volume shrinks or external risks escalate, the market may revert to a range-bound pattern.