Hong Kong's Hang Seng Index Rises for Consecutive Days, Tencent and Alibaba Lead Tech Sector Surge: Capital Flows and Earnings Expectations Analyzed

Hong Kong Stocks Hang Seng Index Climbs for Consecutive Days, Tencent and Alibaba Lead Tech Sector

Recently, the Hong Kong Hang Seng Index has shown a trend of consecutive daily climbs, with market sentiment significantly warming. Driven by the strong performance of the tech sector, the Hang Seng Index has rebounded from its recent lows, reclaiming key psychological levels. Among these, Tencent Holdings and Alibaba, as the "dual engines" of Hong Kong's tech sector, have their stock performance and earnings expectations in the market's spotlight. This article analyzes the logic behind this rebound from three dimensions: capital flows, individual stock performance, and sector support.

1. Capital Flows: Southbound Capital Continues to Increase Holdings, Signs of Foreign Capital Return

According to public data from the Hong Kong Stock Exchange, southbound capital has seen net inflows for several consecutive days recently, with the scale significantly larger than before. Analysts point out that mainland funds' willingness to allocate to Hong Kong tech stocks has increased, mainly based on expectations of a stabilizing policy environment and improving corporate earnings. Meanwhile, some foreign institutions have also shown signs of returning, especially against the backdrop of rising expectations for a Federal Reserve rate cut, as global funds reassess the cost-effectiveness of emerging market assets, highlighting the low valuation advantage of Hong Kong stocks.

In terms of capital distribution, Tencent and Alibaba have become key targets for southbound capital buying. The market generally believes that the two companies' layouts in AI large models, cloud computing, and e-commerce are gradually entering a harvest period, with their robust cash flow and buyback plans providing a safety cushion for their stock prices. Additionally, the overall improvement in Hong Kong stock market liquidity has also boosted the index-level rebound.

2. Tencent Holdings: Gaming Business Recovery, AI Empowerment Opens New Space

Tencent Holdings has recently shown strong stock performance, leading the tech sector. According to the company's financial reports and market analysis, its core gaming business has seen a recovery following the normalization of game license issuance, with several new games performing above expectations post-launch. At the same time, Tencent's investments in AI are beginning to translate into actual revenue; for example, its advertising business has achieved precise targeting through AI algorithms, driving an increase in gross margin.

In terms of earnings expectations, multiple brokerage research reports indicate that Tencent's full-year 2024 revenue is expected to achieve double-digit growth, with WeChat Video Account advertising, enterprise services, and fintech businesses becoming the main contributors to incremental growth. The market is optimistic about Tencent's upcoming quarterly earnings report, expecting its net profit growth rate to outperform revenue growth, reflecting improvements in cost control and operational efficiency.

3. Alibaba: Organizational Restructuring Shows Results, Cloud Business Regains Growth

Alibaba has also played a key role in this rebound. Since the company implemented the "1+6+N" organizational restructuring, the independence and flexibility of each business segment have increased, and market recognition of its strategic transformation has gradually improved. According to public information, Alibaba Cloud's business has regained growth after adjustments, particularly achieving breakthroughs in the government and enterprise market as well as AI computing services.

Furthermore, Alibaba's core e-commerce business, driven by both a low-price strategy and overseas expansion, has seen a rebound in user activity and order volume. The market expects that, with the continuation of the consumption recovery trend, Alibaba's revenue growth rate for fiscal year 2025 (ending March 2025) could recover to mid-to-high single digits. Notably, Alibaba has been increasing its buyback program, having repurchased over $10 billion worth of shares this year, providing strong support for its stock price.

4. Tech Sector's Support for the Broader Market: Significant Linkage Effect of Heavyweight Stocks

In the Hang Seng Index, the tech sector accounts for over 30% of the weight, with Tencent and Alibaba together accounting for nearly 15%. Therefore, the rise of these two stocks has a very pronounced pulling effect on the index. In this rebound, the strong performance of tech stocks not only drove the Hang Seng Index upward but also activated rotational trading in sectors such as biomedicine and consumer electronics.

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 Nasdaq Index. Some institutions believe that, with marginal improvements in China's macroeconomic data and a stabilizing regulatory environment for the internet industry, Hong Kong tech stocks may see a valuation recovery. However, some analysts caution that uncertainties regarding the pace of Fed rate cuts and geopolitical risks could still cause market disruptions.

5. Future Outlook: Can the Rebound Continue?

In the short term, the rebound momentum of the Hang Seng Index still depends on the earnings delivery of tech leaders. The upcoming financial reports from Tencent and Alibaba will be key milestones for the market to test the strength of the rebound. If earnings exceed expectations, it could attract more incremental capital; conversely, it might trigger profit-taking.

In the medium to long term, the appeal of Hong Kong's tech sector lies in its earnings growth potential combined with low valuations. With the acceleration of AI technology commercialization and the advancement of corporate overseas strategies, the fundamentals of Tencent and Alibaba are expected to continue improving. Investors should closely monitor changes in capital flows and policy signals to capture structural opportunities.