Hong Kong stocks are rebounding—what sectors deserve attention?

慢慢变富的牛牛

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Hot Topics in 5 Minutes | Major Capital Rotation! Is the Tech Giant Rebound Here? How to Capture the Rally Opportunity?

Recently, there’s been a clear style shift in global markets—many fellow investors have likely noticed that the previously surging AI hardware sector has collectively “cooled off,” with related Hong Kong and U.S. stocks showing significant pullbacks.

Meanwhile, long-dormant China-concept tech stocks have suddenly “stood back up,” quietly staging a rebound and beginning a valuation recovery.

Has light finally dawned for Hong Kong-listed tech stocks? In today’s 'Hot Topics in 5 Minutes,' we’ll explore how to win this critical rebound battle for tech stocks.

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After AI hardware cooled down, are tech stocks quietly making a comeback?

On June 26,$Hang Seng TECH Index (800700.HK)$ it briefly fell below the 4,300 mark, hitting a new year-to-date low and even dipping beneath the early April 2023 trough.In just over two weeks, the Hang Seng Tech Index has persistently tested its lows and attempted a rebound; as of the Hong Kong market close on July 21, it has rallied nearly 10% cumulatively!Among them $Star Tech Companies (LIST22886.HK)$ The rebound signal is particularly pronounced: $TENCENT (00700.HK)$ Cumulative rebound of over 12%; $NTES (09999.HK)$ Cumulative rebound of over 14%;$XIAOMI-W (01810.HK)$ Cumulative rebound of over 22%; $JD-SW (09618.HK)$ Cumulative rebound of over 22%; $BABA-W (09988.HK)$ Cumulative rebound of over 23%; $MEITUAN-W (03690.HK)$ Cumulative rebound exceeds 28%. During the same period, US stocks $NASDAQ Golden Dragon China (.HXC.US)$ also rebounded by more than 11%.In contrast, AI hardware sectors that surged aggressively in the first half—such as optical communications, storage, and semiconductors—have clearly cooled off, all undergoing significant corrections during the same period.

Data sourced from Futubull; the price change interval covers June 26, 2026 – July 21, 2026

💡 Mini Lesson: $NASDAQ Golden Dragon China (.HXC.US)$ is a key index tracking the overall performance of Chinese companies listed on U.S. exchanges. It covers firms whose primary operations are based in China, including well-known names such as Alibaba, JD.com, PDD Holdings, Baidu, Bilibili, and NetEase. It can be simply understood as the 'U.S.-listed China Internet Index,' serving as a barometer for Chinese ADRs in the U.S. market and a critical benchmark for global investors assessing the investment value of Chinese tech companies. A sharp rise in the Golden Dragon Index typically signals that global capital is actively increasing exposure to core Chinese tech assets.

Are internet stocks staging a broad recovery? Breaking down the key drivers behind the recent strong rebound

Many fellow investors may be wondering: Why have previously underperforming and persistently correcting Chinese internet stocks suddenly regained investor focus?

? In fact,This rebound is not unfounded; rather, it stems from a confluence of multiple factors—including fundamentals, liquidity conditions, and market sentiment—driving a 'valuation recovery' rally.

📌Valuations are at historically low levels, revealing attractive risk-reward ratios.

There’s a saying that fits perfectly: when market expectations are sufficiently low, even modestly better-than-expected data can spark a rally. Prior to this rebound, Hong Kong-listed tech stocks had already undergone deep corrections, creating a 'safety margin forged through declines.'As of June 30, the Hang Seng Tech Index had retreated more than 30% from its peak in October 2025, trading at a trailing P/E ratio of approximately 21.9x. This places it at the 23.6th percentile of its historical valuation range since inception—cheaper than 76% of all historical observations. Some leading stocks have even fallen back to levels seen before the '9/24 rally.'With share prices at depressed levels, tech leaders such as Tencent and Xiaomi have continued share buybacks, sending a clear signal to the market through tangible actions that their stocks are undervalued—potentially establishing a solid floor.

📌Global capital rotation—from 'crowded longs at highs' to 'bottom-fishing at lows'

In the first half of the year, global capital flooded into the AI hardware supply chain (chips, optical modules, memory), causing extreme crowding in related sectors. As shares of South Korea’s two major memory giants plunged and U.S. AI hardware stocks collectively corrected, a large volume of profit-taking capital began seeking new 'reservoirs.' Chinese tech stocks listed overseas, whose valuations had long been compressed to historical lows, naturally became prime candidates for this capital reallocation. Recently, renowned Wall Street bear Michael Burry stated publicly,that now is the golden window to hunt for undervalued stocks in the Hong Kong market. His bullish thesis on Hong Kong equities hinges on the expectation that the global AI chip frenzy will cool, prompting capital to flow out of South Korea, Japan, and the semiconductor sector—and toward undervalued pockets elsewhere.

📌Ongoing AI industry catalysts continue to materialize, potentially shifting the valuation logic from the 'cost side' to the 'revenue side.'

This is also the key difference between the current rebound and previous technical rebounds:AI commercialization is accelerating into the earnings realization phase.Previously, the market viewed internet companies as 'cost centers' for AI, but with recent technological breakthroughs by several major tech-internet firms, market sentiment is shifting.

Recently, multiple leading tech-internet companies have significantly accelerated their AI monetization progress:Alibaba's AI commercialization is gradually materializing, with Alibaba's Qwen set to serve as the core AI foundation fully integrated into Apple's intelligent ecosystem; Tencent officially launched Hy3, which briefly topped OpenRouter's global weekly model usage chart; native office AI agent Work Buddy surpassed 20 million monthly active users, solidifying its position as the domestic leader in office AI; Zhipu's open-source GLM-5.2 model ranked among the top three globally and has been deployed in gigawatt-scale domestic AI computing data centers.According to a CICC research report, China’s internet cloud vendors are moving away from cost-ignorant, extensive expansion, and AI monetization is poised to become the industry’s main growth driver.

📌Southbound capital and foreign funds are jointly returning, with real money continuously flowing in

In the first half of 2026, mainland investors’ willingness to allocate capital to Hong Kong stocks weakened noticeably. Data shows that net southbound inflows totaled only approximately HK$301 billion, less than 22% of the full-year 2025 figure.However, both southbound capital and foreign funds have recently returned to Hong Kong equities simultaneously, marginally improving liquidity and providing ample 'ammunition' for this rally.

On one hand, the momentum of southbound capital inflows has markedly rebounded, reversing the earlier slowdown trend and becoming a key support for the current rebound.According to Wind data, southbound capital recorded a cumulative net inflow of HK$80 billion into Hong Kong equities in the first half of July (July 1–16), compared with just HK$27.1 billion for the entire month of June.Amid volatility in other Asia-Pacific markets, capital continues to rebalance assets through 'selling high and buying low.'; both active and passive foreign funds have recently registered net inflows into Hong Kong equities, with concentrated buying in technology sectors such as software, hardware, and semiconductors. In addition,July and August are typically the off-season for Hong Kong IPOs,and the next wave of large-scale lock-up expirations for industry-related shares is generally concentrated around late September, significantly easing micro-level funding outflow pressure and facilitating coordinated positioning by various investor groups.

📌Continued supportive policy signals provide dual backing from platform economy reforms and macro liquidity.

A series of policy announcements has also effectively boosted market confidence.Shift in platform economy regulatory direction:Seven government departments jointly issued the 'Action Plan to Promote Collaborative Development of Large, Medium, and Small Enterprises in the Platform Economy,' marking a shift in regulatory philosophy from 'standardization and rectification' toward 'empowerment and innovation,' which is expected to further reduce long-term policy uncertainty for the internet sector;Macro liquidity support:The central bank governor explicitly stated that the nation’s foreign exchange reserves will increase allocations to Hong Kong assets and raise the annual net investment quota of the 'Southbound Trading Connect' to RMB 800 billion, injecting fresh liquidity into Hong Kong stocks;Expectations for domestic consumption policies:The official release of the '15th Five-Year Plan for Expanding Consumption' has heightened market expectations for domestic demand stimulus policies in the second half of the year. Internet sector earnings are closely tied to macro-level consumption trends, which bodes well for a recovery in traditional businesses.

Can the market rebound continue? Four key signals to watch closely

While the rebound is certainly encouraging, Futubull reminds all fellow investors:The rebound from lows follows a wave-like progression; whether this market rally can sustain depends on closely monitoring the following key signals.

Signal 1: Changes in overseas liquidity

Liquidity for Chinese ADRs (especially those listed in Hong Kong) is highly dependent on overseas capital flows, and a stronger US Dollar Index has consistently been the 'primary factor' suppressing Chinese ADRs.The Federal Reserve’s future policy path, USD trends, and global risk appetite will directly affect foreign investors’ willingness to allocate capital to Hong Kong-listed stocks. Currently, foreign holdings of Chinese assets remain at historically low levels, providing ample room for short-covering; however, should external monetary conditions tighten again, the rebound momentum could face renewed headwinds.Key focus going forward: the latest guidance from the Fed’s July FOMC meeting.

Note: An unexpected tightening of monetary policy by global central banks remains a key risk. Should overseas liquidity contract again, the index could continue declining to seek support. Growth sectors such as the Hang Seng Tech Index are highly sensitive to interest rates; elevated and volatile U.S. Treasury yields would directly compress the sector's valuation anchor.

Signal #2: Next Round of Earnings 'Report Card' Validation

'Low valuation does not automatically justify upward momentum.' The key lies in whether earnings growth can prove that current low valuations are unwarranted. Upcoming quarterly results from major internet giants will be critical, especiallythe monetization capabilities of AI and cloud computing businesses, which will become core indicators for capital inflows or outflows.According to Cathay Haitong Securities, EPS earnings expectations for the Hang Seng Tech Index have shown signs of recovery since late May,and a fundamental inflection point is gradually approaching.

Signal #3: Global Tech Style Rotation Timing

The current rally occurs against a backdrop of cooling in globally overheated AI and semiconductor sectors, with capital rotating from high-valuation assets into undervalued ones. If overseas tech stocks continue adjusting and market risk appetite declines further, this style rotation trend could become even clearer, offering stronger support to undervalued Hong Kong-listed tech and internet stocks. Conversely, if overseas AI sectors regain strength, capital may flow back into high-flying segments, diverting funds away from Hong Kong tech names. Therefore, it’s essential to closely monitor whether the adjustment in the AI hardware supply chain persists.

Signal #4: Geopolitical and External Sentiment Volatility

Recently, U.S.-Iran tensions have escalated again, pushing international oil prices back above $90 and heightening market risk aversion. The global environment in 2026 remains highly complex; geopolitical developments and overseas attitudes toward China’s tech industry could continue to disrupt market sentiment in the near term—this is a systemic risk that all fellow investors should remain vigilant about.

Want to capture the rebound opportunity in leading tech stocks? Three quick strategies to get on board

🎯 Focus on the big, skip the small—zero in on Hong Kong’s ‘core assets’ among market leaders

Top-tier companies have stronger risk resilience and higher earnings certainty. Their rebound performance is typically more stable, making them better suited for most new investors compared to speculative small-cap stocks.In the early stage of a market recovery, capital flows first into fundamentally solid leaders with wide economic moats. As seen in this rebound cycle, Alibaba, Tencent, Meituan, and Xiaomi have significantly outperformed the broader market.If you’re bullish on this Hong Kong market rebound, focus on the big and skip the small—prioritize tech leaders with solid fundamentals.

Moreover,If you find constant monitoring time-consuming, consider using a“monthly investment” approachPositioning:to buy fixed amounts monthly or biweekly within your predefined valuation safety margin. This helps average down your cost basis and reduces psychological stress during market volatility.

🎯 Tired of stock-picking hassle? Use ETFs for ‘one-click exposure’

If you prefer not to dive deep into individual company research or worry about idiosyncratic risks in single stocks, ETFs offer a more time-efficient and convenient option!The market offers multiple ETFs that either hold significant positions in leading tech and internet stocks or track the China Internet Index, providing exposure to major names like Alibaba, Tencent, and Meituan all at once, thereby helping to diversify single-stock risk.

📌 Internet-themed ETFs:Tech and internet stocks have shown strong performance in this recent rebound. If you remain bullish on their outlook, consider prioritizing internet-themed ETFs. FutubullETF ScreenerQuickly identify high-quality internet ETFs in the market. In the U.S. market, consider: $KraneShares CSI China Internet ETF (KWEB.US)$ 、 $Direxion Daily CSI China Internet Index Bull 2x Shares ETF (CWEB.US)$ 。

KWEB: Currently one of the world’s largest and most liquid China internet-themed ETFs, closely tracking the CSI Overseas China Internet Index.Its top 10 holdings include multiple leading Chinese internet stocks, collectively accounting for approximately 60% of the fund: $TENCENT (00700.HK)$ 、 $BABA-W (09988.HK)$ 、 $PDD Holdings (PDD.US)$ 、 $MEITUAN-W (03690.HK)$ 、 $NTES (09999.HK)$ 、 $Full Truck Alliance (YMM.US)$ 、 $BEKE-W (02423.HK)$ 、 $JD-SW (09618.HK)$ 、 $KUAISHOU-W (01024.HK)$ 、 $BIDU-SW (09888.HK)$ 。From June 26 to July 20, KWEB posted a cumulative rebound of over 16%.

CWEB:This is a leveraged ETF aiming to deliver 200% of the daily return of its benchmark index. Instead of directly holding stocks, it achieves daily 2x leverage through holdings of the KWEB ETF (approximately 52.6% weight), cash management instruments, and index swap contracts.From June 26 to July 20, CWEB rallied over 33% cumulatively.

⚠️ Note: CWEB aims to deliver 2x daily returns; if held for more than one day, its actual performance may deviate significantly from twice the index return due to 'volatility decay' in choppy markets. Additionally, the fund’s fees are relatively higher.

📌 Broad-market ETFs:If you're bullish on a tech rebound but concerned about excessive volatility in single-theme products, consider relatively「Steady」broad-market ETFs instead.

Broad-market ETFs are not limited to a single sector and cover multiple industries, offering broader market representation and better risk diversification. Since tech giants hold very high weightings in Hong Kong broad-market indices (Tencent + Alibaba + Meituan typically account for about 20%–25% of the Hang Seng Tech Index), holding broad-market ETFs still allows indirect exposure to rebounds in these tech leaders—albeit with lower elasticity.

- Tracking the Hang Seng Index:Consider $TRACKER FUND OF HONG KONG (02800.HK)$ 、 $iShares Core Hang Seng Index ETF (03115.HK)$ 、 $Global X HSI Covered Call Active ETF (03419.HK)$、 $CSOP HANG SENG INDEX ETF (03037.HK)$ 、 $CSOP HANG SENG INDEX DAILY (2X)LEVERAGED PRODUCT (07200.HK)$

The above ETF selection criteria: tracking the Hang Seng Index, AUM no less than HK$1 billion, and non-leveraged or long-only leveraged products.

- Tracking the Hang Seng Tech Index:Worth watching: $CSOP Hang Seng TECH Index ETF (03033.HK)$ 、 $iShares Hang Seng TECH ETF (03067.HK)$$CSOP Hang Seng TECH Index Daily (2x) Leveraged Product (07226.HK)$$Hang Seng TECH Index ETF (03032.HK)$$Global X Hang Seng TECH Covered Call Active ETF (03417.HK)$$Global X Hang Seng TECH Covered Call Active ETF (03417.HK)$$ChinaAMC Hang Seng TECH Index ETF (03088.HK)$$CMS Hang Seng Tech Index ETF (03423.HK)$

ETF screening criteria above: tracks the Hang Seng Tech Index, assets under management of at least HK$100 million, and no leveraged or bullish leveraged products

🎯 Advanced strategy: Use options tools to aim for higher returns

If you have substantial investment experience and can tolerate higher risk, you can strategically use options to capture greater gains from the current market rebound.

📌Strongly bullish on the rebound potential of Hong Kong tech stocks: Long Call (buying call options), an aggressive 'flexible choice'

⚠️ Risk warning: Buying call options requires paying a premium. If the stock price doesn’t rise—or even falls—or if the gain is insufficient to cover the cost, the option may expire worthless, resulting in a total loss of the premium paid. Additionally, options have an expiration date; even if the stock rebounds later, missing the deadline will still result in a loss.

📌Bullish on a medium-term rebound in tech stocks but expect near-term pullbacks; looking to accumulate at lower prices or earn premiums: Short Put (selling put options), a 'rent-collecting strategy' suitable for逢低部署 (strategic positioning on dips)

⚠️ Risk warning: While selling put options generates upfront premium income, a sharp drop in the stock price could force you to buy the underlying shares at the strike price, exposing you to significant downside losses—theoretically unlimited. Your account must also maintain sufficient margin, and a sudden price drop may trigger a margin call.

📌Expecting a modest rebound in Hong Kong tech stocks with cautious optimism: consider a Bull Call Spread (bull call spread strategy).

⚠️ Risk warning: This strategy has a capped maximum profit—even if the stock surges sharply, your gains won’t increase beyond that cap. If the stock price declines or rises only slightly, the entire position will still incur a loss. It’s suitable for anticipating a 'gradual, moderate rebound' and not appropriate for betting on explosive upside moves.

Of course, many fellow investors might feel: 'I understand the logic, but when it comes to analyzing the earnings trajectory of individual companies, I’m still completely lost—and reading through dozens of research reports takes too much time.' Don’t worry—Futubull AI has recently launched a major upgrade: Expert Mode!‘Provide a deep analysis on the sustainability of the current rebound in Chinese tech stocks listed overseas, the risks posed by geopolitical tensions, and suitable entry strategies for beginners.’, and within just a few minutes, you’ll receive a clear, professional analysis that thoroughly breaks down the topic from multiple angles—fundamentals, capital flows, and policy outlook. Try it nowFutubull AI Expert Mode, and unlock your very ownpersonal financial analyst!

Final thoughts

The valuation recovery of Chinese tech stocks listed overseas is certainly not a 100-meter sprint—it’s a marathon that demands endurance.As capital continues rotating out of high-valuation overseas sectors, Chinese ADRs have already demonstrated solid value-for-money and resilience. For all fellow investors,maintaining patience, managing position sizes, and making rational decisions are the right mindsets for this investment journey.

Getting rich slowly starts first and foremost with stability~

This article is provided for general informational and educational purposes only and does not constitute, nor should it be construed as, investment advice, solicitation, recommendation, offer, research report, or trading guidance regarding any securities, financial products, or instruments. The information contained herein is derived from publicly available market data and third-party research. Futu endeavors to ensure, but does not guarantee, the accuracy, completeness, or timeliness of such information. Any mention of specific stocks, ETFs, or financial instruments in this article is solely for illustrative or educational purposes to explain market phenomena and does not constitute a recommendation of those products. Investing involves risk; the value of financial products may rise or fall and could even become worthless. Past performance and forecasted data are not indicative of future results. Before making any investment decision, investors should carefully consider their own financial situation, investment experience, investment objectives, and risk tolerance, and, if necessary, consult an independent professional advisor. Leveraged products (including but not limited to leveraged ETFs, options, and futures) carry extremely high risk and are not suitable for all investors. Investors may lose their entire initial investment or even more than the amount initially invested. Prior to trading such products, you should ensure that you fully understand the associated risks and have read the product's risk disclosure documents.

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