Hang Seng Index Rallies for Days as Tencent and Alibaba Lead Tech Sector: Earnings Hopes and Fund Flows Drive Hong Kong Recovery

Hang Seng Index Rallies for Days, Tencent and Alibaba Lead Tech Sector

After a period of adjustment, Hong Kong's Hang Seng Index has recorded consecutive gains recently, with market sentiment notably warming. The tech sector has emerged as the core engine of this uptrend, with heavyweight stocks Tencent Holdings and Alibaba showing particularly strong performance, lifting the index back above key psychological levels. This article analyzes the driving logic behind this rebound from three dimensions: earnings expectations, capital flows, and the macro environment.

Earnings Season Approaches, Profit Expectations Improve for Tech Giants

As the window for Hong Kong stock half-year reports approaches, market expectations for the performance of tech leaders like Tencent and Alibaba have turned optimistic. According to analysis from multiple brokerages, Tencent's revenue growth is expected to stabilize and rebound, driven by its gaming business's overseas expansion and growth in video account advertising revenue. Meanwhile, Alibaba is benefiting from improved profitability in its cloud computing business and a recovery in e-commerce market share, with the market generally anticipating a sequential improvement in its core profits. This marginal improvement in earnings expectations provides fundamental support for stock prices.

Notably, Tencent has accelerated its layout in the field of large AI models, with its Hunyuan large model now integrated into multiple business scenarios, earning high praise from the market for its technological monetization potential. On Alibaba's side, following organizational restructuring, the independent operational efficiency of various business segments has improved, particularly with loss reduction in local services and cloud computing exceeding expectations. These positive signals have collectively driven investors to reprice the tech sector.

Southbound Capital Continues to Flow In, Institutional Buying Intensifies

Capital flow data shows that southbound capital has been consistently net buying through the Stock Connect channels recently, with Tencent and Alibaba ranking among the top net buys. According to data from the Hong Kong Stock Exchange, over the past few trading days, southbound capital has accumulated net purchases totaling tens of billions of Hong Kong dollars, with the tech sector being the primary target. At the same time, some international long-term funds have also increased their holdings of Hong Kong tech stocks recently, reflecting foreign recognition of the stabilizing regulatory environment for China's internet industry.

From a trading structure perspective, this rebound is not purely sentiment-driven but is accompanied by a moderate increase in trading volume. The average daily turnover of the Hang Seng Index has rebounded by about 20% from recent lows, indicating that incremental capital is entering the market. Particularly, the increased turnover rates for Tencent and Alibaba suggest that market divergence on their future trajectory is narrowing, with bullish forces gaining the upper hand.

Macro Environment Improves Marginally, Valuation Repair Space Opens Up

On the macro front, rising expectations of a Federal Reserve rate cut and the intensification of domestic economic policies have created a favorable external environment for Hong Kong stocks. According to the Fed's recent statements, inflation data continues to decline, and market expectations for a rate cut within the year have been repriced, alleviating pressure on capital outflows from emerging markets. Meanwhile, the People's Bank of China, in its second-quarter monetary policy report, emphasized maintaining reasonably ample liquidity and increasing financial support for technological innovation, directly benefiting the valuation repair of Hong Kong's tech sector.

From a valuation perspective, the current price-to-earnings ratio of the Hang Seng Tech Index remains at historically mid-to-low levels, showing a significant discount compared to the US tech sector. Driven by improved earnings expectations and capital inflows, the valuation repair rally in the tech sector is likely to continue. However, some analysts point out that the sustainability of the subsequent rebound still depends on the actual realization of corporate earnings and changes in geopolitical risks.

Sector Rotation Emerges, Focus on Upcoming Catalysts

Beyond Tencent and Alibaba, other tech stocks such as Meituan and JD.com have also shown signs of following the uptrend, with clear sector rotation characteristics. Market participants believe that if the Hang Seng Index can hold above key resistance levels, the profit-making effect in the tech sector will further spread to growth tracks like biomedicine and new energy. In the short term, the upcoming earnings reports from Tencent and Alibaba will be key nodes to test the strength of the rebound; in the medium to long term, the commercialization progress of artificial intelligence and the pace of consumption recovery will be core variables determining the trajectory of Hong Kong tech stocks.