Capital favors 'old leaders': Tencent continues to fall, so why are tens of millions in funds still being invested against the trend?

$TENCENT (00700.HK)$Capital favors 'old leaders': Tencent continues to fall, so why are tens of millions in funds still being invested against the trend?

In the Hong Kong stock index warrants (CBBCs + callable bull/bear contracts) market over the past five trading days, capital flows demonstrated distinct structural characteristics: major blue chips and technology leaders became the core targets of net inflows, while banks, precious metals, and some Chinese stocks experienced net outflows, with speculative focus highly concentrated on key weighted stocks.

The leading effect was particularly prominent for Alibaba (09988). $BABA-W (09988.HK)$ With a net inflow of HK$26.98 million, Alibaba stood far ahead—nearly double that of BYD (01211), which ranked second at HK$13.29 million—becoming the absolute core of capital deployment. The tech-internet sector was highly favored, with core tech stocks such as Alibaba, Tencent (0700), Kuaishou (1024), $KUAISHOU-W (01024.HK)$ and Xiaomi (01810) $XIAOMI-W (01810.HK)$ collectively receiving net inflows exceeding HK$50 million, reflecting market optimism regarding a rebound or continued trend in the tech sector.

Among them, Tencent ranked third with a net inflow of HK$13.27 million, just behind Alibaba and BYD. Capital inflows were mainly concentrated in call warrants and bull contracts, indicating strong investor confidence in its short-term upward price movement. Additionally, the energy and financial sectors also saw steady investment, benefiting from oil price expectations and asset allocation needs; CNOOC (0883), HSBC (005), PetroChina (00857), and Bank of China (3988) $CNOOC (00883.HK)$ $HSBC HOLDINGS (00005.HK)$ $BANK OF CHINA (03988.HK)$ were among the beneficiaries, while BYD (01211) and Meituan (3690) represented preferences for new consumption and renewable energy sectors.

Tencent Holdings (00700) has shown persistent weakness in recent share price performance, remaining in an adjustment phase since retreating from its January high of HK$639. As of the close on March 2, 2026, the share price stood at HK$514, down 0.77%, with a trading volume of HK$15.821 billion. On March 3, the latest share price was reported at HK$523, up 1.75%.

From a technical trend analysis, Tencent remains in a bearish trend, and investors should remain cautious. UBS Group's latest research report believes that Tencent's current share price corresponds to an expected P/E ratio of only 14 times for 2026, significantly lower than the historical average of 18 times, presenting significant investment value. The firm has assigned a 'Buy' rating with a target price of 780 yuan. Ahead of the earnings announcement on March 18, the market is closely watching for details on Tencent’s AI strategy and gaming business performance.

Technical Analysis and Support/Resistance Levels

Based on a comprehensive analysis of technical indicators, Tencent is currently in a range where 'Buy' signals are slightly dominant, but it has not reached a strong buy level yet. Multiple oscillation indicators show oversold conditions; stochastic oscillators are in the oversold zone, while the CCI indicator signals a buy. RSI stands at 27, which is within the oversold territory. However, MACD, Bollinger Bands, and Ichimoku Cloud all indicate sell signals, reflecting continued short-term downward pressure.

Looking at key technical levels, Tencent’s short-term support lies at 496 yuan. If this level breaks, the next support will be tested at 478 yuan. On the resistance side, the immediate short-term resistance is at 542 yuan. A breakout above this level could push the target to 589 yuan. Notably, the closing price of 514 yuan on March 2 has fallen below several major moving averages, including the 10-day MA (524.7 yuan), 30-day MA (568.35 yuan), and 60-day MA (590.03 yuan), indicating weak short-term momentum. As Simon from [HKEX Podcast] also pointed out, the current technical signals lean towards buying but not strongly so. Investors planning to adopt a 'buy-the-dip' strategy should deploy their positions in batches, avoiding full positions at once, to mitigate risks if the stock continues to fall.March 2nd [HKEX Podcast] Hang Seng Index, Meituan, CNOOC, Zhaojin Mining, BYD, Tencent

Review of Warrants and Bull/Bear Contracts

Reviewing Tencent's warrant products mentioned on February 24, their performance over the following two days confirmed the attractiveness of short-selling products. Societe Generale Bear Contract (63346) recorded a 30% increase over those two days, while the underlying stock dropped by 1.54%. Bank of China Put Warrant (26075) gained 6%, outperforming the stock as well. This reflects that put warrants and bear contracts can provide effective hedging tools for investors during a downtrend, even creating profit opportunities.

Warrant Product Recommendations and Terms Analysis

For investors bullish on Tencent's future performance, consider the following two call warrants:

Merrill Lynch Call Warrant (15921) $MSTENCT@EC2606C.C (15921.HK)$ : Strike price of 530.5 yuan, offering 9.2x leverage. This product provides relatively high leverage, suitable for investors looking to amplify gains from stock price increases. The strike price of 530.5 yuan is slightly higher than the current price of 514 yuan, making it a slightly out-of-the-money product. If the underlying stock breaks through the short-term resistance at 542 yuan, this warrant will move into the money, potentially delivering substantial returns.

Bank of China Call Warrant (16225) $BITENCT@EC2606A.C (16225.HK)$ With the same exercise price of HK$530.5, offering 9.5x leverage. The key feature of this product is that both its premium and implied volatility are the lowest among similar products, meaning investors pay less time value and enjoy higher cost efficiency. If the underlying stock is expected to steadily move towards the resistance level at HK$542 before and after earnings, this warrant would be an optimal choice.

For investors bearish on Tencent, the following two put warrants can be considered:

UBS Group Put Warrant (21984) $UBTENCT@EP2606A.P (21984.HK)$ Exercise price HK$499.8, providing 7.5x leverage. This product has relatively high leverage, making it suitable for capturing short-term downward movements. With an exercise price of HK$499.8, which is below the current price of HK$514, this is an in-the-money put warrant with higher sensitivity to declines in the underlying stock. If the stock price breaks below the support level at HK$496, this warrant will perform more prominently.

Bank of China Put Warrant (23122) $BITENCT@EP2606A.P (23122.HK)$ With the same exercise price of HK$499.8, offering 8.2x leverage. This product has the lowest premium and implied volatility among similar offerings, providing stronger downside protection. If investors anticipate the stock price gradually testing the support level at HK$478 but are concerned about a contraction in implied volatility affecting returns, this warrant is a more prudent choice.

Bull/Bear Certificate Recommendations and Terms Analysis

For bull/bear certificates, investors bullish on Tencent may consider the following two bull certificates:

Bank of China Bull Certificate (62650) $BI#TENCTRC2612K.C (62650.HK)$ Call price HK$489, offering 15.6x leverage. This product has a relatively low premium, ensuring better cost efficiency. The call price at HK$489 is below the short-term support level at HK$496, providing approximately HK$25 in buffer zone and solid downside defense. Even if the stock price falls to the support level at HK$478, this certificate still maintains a safety margin, making it suitable for investors adopting a 'buy on dips' strategy.

UBS Group Bull (60107) $UB#TENCTRC2606G.C (60107.HK)$ : Recovery price at 492 yuan, offering 19.8x leverage. This product has relatively low premium and higher leverage, making it suitable for aggressive investors. The recovery price of 492 yuan is also below the support level of 496 yuan, but with limited buffer space, requiring stronger performance from the underlying stock. Investors should closely monitor the defensive strength at the 496-yuan level.

Investors who are bearish on Tencent can consider the following two bear contracts:

J.P. Morgan Bear (64224) $JP#TENCTRP2901A.P (64224.HK)$ : Recovery price at 550 yuan, offering 14.1x leverage. This product has relatively low premium, with a recovery price of 550 yuan above the short-term resistance level of 542 yuan, providing about 36 yuan of buffer space, indicating strong defense. If the underlying stock rebounds to 542 yuan and encounters resistance, this contract is an ideal deployment tool.

UBS Group Bear (62687) $UB#TENCTRP2812O.P (62687.HK)$ : Recovery price at 550 yuan, offering 14.3x leverage. This product offers high actual leverage with low premium, making it suitable for investors seeking high returns. It shares the same recovery price as J.P. Morgan Bear but provides slightly higher leverage, making it more sensitive to declines in the underlying stock.

Summary and Interactive Questions

Overall, Tencent's short-term trend is constrained by multiple moving averages, technically still in an adjustment phase. However, its valuation has fallen to historical lows, and with positive outlooks from UBS Group and Goldman Sachs, long-term investment value is emerging. Investors can choose appropriate CBBCs or bull/bear contracts based on their risk tolerance. Bulls may consider contracts with recovery prices between 480-492 yuan or call warrants with a strike price of 530.5 yuan; bears might opt for bear contracts with a recovery price of 550 yuan or put warrants with a strike price of 499.8 yuan. The key is to closely watch the support level at 496 yuan and resistance level at 542 yuan as references for entry and exit points.

Interactive Questions:

1. Do you think Tencent’s share price will first test the 496-yuan support level or rebound to challenge the 542-yuan resistance level before the earnings announcement on March 18?

2. If you're optimistic about Tencent's medium-to-long-term rebound, would you choose high-leverage bull certificates (such as UBS Group 60107), or lower-cost BOC call warrants (16225)? Feel free to leave a comment and share your thoughts!

Reminder: This article does not constitute any investment advice.

This article is for reference only and does not constitute any investment advice. The market data, opinions, and analysis contained herein may change at any time without prior notice. We are not responsible for any loss or damage caused by reliance on the information in this article. Technical analysis only shows whether certain technical conditions are met; a comprehensive assessment of asset performance should combine other data and should not solely rely on this article to make trading decisions. Please note that past performance is not indicative of future results. Follow Jenny's insights on Hong Kong stock warrants for more professional analysis.

#Tencent Holdings #00700 #Hong Kong Stock Analysis #Technical Analysis #Support and Resistance Levels #Warrants Deployment #Bull and Bear Certificate Strategy #UBS Report #AI Intelligence #Hong Kong Stock Warrants Jenny

$Hang Seng Index (800000.HK)$$Hang Seng TECH Index (800700.HK)$$JD-SW (09618.HK)$$Hang Seng China Enterprises Index (800100.HK)$

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