Hot Stock Commentary | Hang Seng Tech: Valuation Mismatch, the Other Side of the Darkest Hour

I. The Overlooked Valuation Mismatch

The Hang Seng Tech Index currently trades at a forward P/E ratio of only 13.9x—below its 3-year average (14.65x) and approaching one standard deviation below its 1-year historical mean (13.62x）。

The current market sentiment is reminiscent of September 2024, the most pessimistic moment in the pricing of Chinese tech stocks.Although the market has not yet fallen to an extreme level, positioning and sentiment are already showing a high degree of alignment.

Meanwhile, the ICE Semiconductor Index (the benchmark index for the SOXX ETF, which covers U.S.-listed semiconductor companies) is trading at 32.6x, just below its 3-year high (34.33x), trading at a premium of over 20%。

On the other hand, the FTSE China A50 Index (XIN9I) stands at 11.8x, above its 3-year average (10.79x), close to one standard deviation above the mean (11.84x）。Within Chinese assets, the Hang Seng Index is significantly underweight, which aligns with the current popular sentiment of avoiding so-called 'old economy' and 'China-domiciled' stocks.

This divergence represents a valuation mismatch.The same macro backdrop—the globally AI-driven capital expenditure cycle—should not result in one index being priced at the ceiling while the other is priced at the floor.

The market might be right: Hang Seng Tech could continue falling toward valuation levels seen in September 2024, while U.S. semiconductor stocks keep climbing to higher valuations amid rising long-end bond yields.But it’s also possible the market needs a correction—and that moment may be drawing near.

II. Alibaba and Meituan—Compressed Valuations, Accelerating Fundamentals

Breaking down two heavyweight constituents of Hang Seng Tech reveals an even starker sense of absurdity in current pricing.

🔵 $BABA-W (09988.HK)$ — Current price HK$106.9, forward FY2 EV/Sales ratio of approximately 1.04x

Based on a one-year look-back period, the current EV/Sales ratio has already fallen below its historical low (1.07x). Using a two-year lookback period, it falls between one standard deviation below the mean (0.90x) and the mean (1.29x).The market is pricing Alibaba's revenue as if it were shrinking.

The opposite is true. The March quarter earnings report showed:

① Cloud business revenue grew year-over-year 38%, with AI-related products achieving triple-digit growth for the eleventh consecutive quarter.

② AI products now account for 30%, annualized revenue is expected to exceed RMB 10 billion next quarter.

③ Consensus estimates show 2FY earnings growth of 40.5%, with a three-year forward revenue CAGR of 11.5%. The consensus analyst target price is HK$181.59，, implying 70% upside potential.

AI monetization is not a distant prospect—it is materializing this quarter. Yet, the valuation reflects none of this. If Alibaba Cloud were listed on U.S. markets, it would tell a completely different story.

🟡 $MEITUAN-W (03690.HK)$ — Current price HK$74.25, with a forward 2FY EV/Sales ratio of approximately 0.72x

Meituan's EV/Sales ratio has already fallen to a two-year absolute low. The market is assigning a valuation of only 11.75% to a company with an expected revenue CAGR of 0.72xtimes next year's revenue.

Q1 2026 earnings (announced on June 1) beat expectations:Adjusted net loss was RMB 5 billion, significantly better than the market’s expectation of RMB 6.8 billion. Core Local Commerce operating losses narrowed by 80% quarter-over-quarter. Management expects the food delivery business to return to breakeven in Q2.

The market has also overlooked Meituan's investment portfolio. Meituan has invested in more than 50hard-tech companies, over a quarter of which have reached unicorn status, and nearly 10 are already listed or in the IPO process. Zhipu AI’s market cap has exceeded 320 billion yuan; Both Moore Threads and MetaX surpassed RMB 100 billion in market capitalization on their first trading day; Unitree Robotics' valuation RMB 42 billion。

These are not unrealized bets, but gains that have already materialized or are about to be realized—sitting on the balance sheet yet entirely ignored by EV/Sales multiples based on core operations; the market still prices Meituan as a local services business.

III. "Sell in May and go away, June is worse, July rebounds" – Technical washout

That old saying about Hong Kong stocks—Sell in May and go away, but June is bleak and July turns things around—could play out textbook-style once again.

📌 Key support levels are being tested or breached:

$BABA-W (09988.HK)$ : breaking below HK$100 Psychological support level at the 30-month moving average 107.6 Trading below it

$MEITUAN-W (03690.HK)$ Testing the previous low from January 2024

$Hang Seng TECH Index (800700.HK)$ Approaching the March 2026 low (around 4,619 points）

In the micro market structure of Hong Kong-listed stocks, a technical breakdown below support can trigger severe consequences.Margin calls lead to forced liquidations, which in turn spark further selling; unwinding leveraged positions amplifies trading volume during the decline.

Meituan's weekly trading volume has already declined significantly compared to August 2025, suggesting forced liquidations may be nearing their end, and short-selling volume has also dropped markedly.

Once all forced sellers have exited and short interest has diminished, order book depth thins. In this state,the market becomes extremely prone to ignition—any catalyst, whether policy stimulus, capital inflows, or an earnings beat, can trigger outsized volatility. The drier the market, the less capital is needed to move prices.

This is what everyone is familiar with as left-side trading:

🔴 Extreme pain → Surrender → Exhaustion → Spark → Reversal 🟢

Currently, we may be in the 'capitulation' or 'exhaustion' phase.Valuation dislocation signals direction to investors, while technical cleansing suggests that timing may be closer than previously thought.

🔗 Valuation data source: Bloomberg consensus estimates, based on closing prices as of June 17.

[Investment Advisory Information]

Huang Hongchang | SFC Central Reference Number: BRO307

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