Since the beginning of November, a notable market style shift has emerged. Multiple brokerages suggest that as year-end approaches amid a bullish environment, style rotations often occur, with technology, consumer sectors, and core assets being key investment targets. Historically, Hong Kong stocks remain undervalued. Wind data shows that as of October 31, the Hang Seng Tech Index's PE-TTM stood at 22.9x, in the 29th percentile since records began. Globally, Hong Kong’s broad-based valuations are significantly lower—since 2005, the Hang Seng Tech Index has consistently traded below the S&P 500 (95%), Nasdaq (88%), Germany’s DAX (79%), Japan’s Nikkei 225 (73%), and India’s Nifty (72%).
On the liquidity front, southbound capital inflows into Hong Kong stocks exceeded RMB 1.1 trillion in 2025, primarily driven by mutual funds and insurers. Institutional inflows are expected to persist, with net southbound flows projected to surpass RMB 1.5 trillion next year. Foreign investors also showed consensus in Q3, with both long- and short-term funds favoring Hong Kong tech stocks, signaling growing confidence in the sector. Institutional behavior may dominate the style shift. Data from AVIC Securities reveals that active equity funds heavily increased tech exposure in Q3 while reducing holdings in blue-chips like banks.
Amid this shift, how should investors identify new market leaders? Most brokerages argue that the tech growth narrative remains intact, with Hong Kong’s tech, consumer, and core assets offering scarcity value. The AI industry’s acceleration—marked by breakthroughs—has further bolstered growth prospects for tech stocks, particularly the Hang Seng Tech Index. Companies are expected to ramp up AI-related investments.
Hua Tai Securities previously highlighted the "Magnificent Seven" (Apple, Google, Amazon, Microsoft, Meta, Tesla, Nvidia) as core U.S. tech assets, driven by steady earnings and innovation. Similarly, since DeepSeek’s launch, capital has accelerated into Hong Kong’s tech leaders, including Xiaomi, Lenovo, BYD, SMIC, Alibaba, Tencent, and Meituan—China’s equivalent core tech assets.
Key beneficiaries: - **Xiaomi (01810)**: A major player in AI device integration, with growth drivers including EV expansion, smartphone margin improvements, and edge AI adoption (e.g., AI glasses). - **Lenovo (00992)**: AI-driven PC/server demand recovery and emerging market opportunities (e.g., Middle East IT infrastructure investments). - **BYD (01211)**: EV leader accelerating smart features in mass-market models, targeting 5.5M sales in 2025. - **SMIC (00981)**: Top-tier foundry benefiting from localization trends and improving advanced-node yields. - **Alibaba (BABA/09988)**: Cloud demand fueled by AI applications, with e-commerce innovations stabilizing core valuations. - **Tencent (00700)**: AI-powered ad monetization (e.g., Video Accounts), gaming (3D models), and cloud commercialization. - **Meituan (03690)**: Local services leader with untapped food delivery potential and recovering in-store profits.