Up over 8% since July! Why has the Hang Seng Tech Index been able to rally against the market trend?

In early July, a global tech stock sell-off suddenly hit the markets.

On July 28, $Korea Composite Index (.KOSPI.KR)$ plunged more than 10% in a single day, briefly triggering a circuit breaker during trading, $SK Hynix (000660.KR)$ tumbled sharply by over 13% in one day, $Samsung Electronics (005930.KR)$ dropped over 12% in a single day; on the U.S. side, $Dow Jones Industrial Average (.DJI.US)$ managed to close 1% higher against the broader downturn, driven by traditional blue-chip stocks, but the semiconductor sector continued to bleed heavily— $PHLX Semiconductor Index (.SOX.US)$ closed down 4.5%.

Behind this sell-off lies the market’s fundamental reassessment of the AI investment thesis, as investors begin to question: when will massive capital expenditures finally translate into tangible profits?

However, just as global tech stocks were reeling from heavy losses, the Hang Seng Tech Index staged a notable independent rally.

Hang Seng Tech Index: From 'Missing the Bull Market' to 'Safe Haven'

Looking back at the first half of the year, $Hang Seng TECH Index (800700.HK)$ the index found itself in an awkward position. Since hitting an all-time high in October 2025, it has been on a steady decline, with cumulative losses exceeding 30% by the end of June 2026—making it the worst performer among major global tech indices.

But entering July, the situation reversed significantly. On July 8, all three major Hong Kong stock indices closed higher, $Hang Seng TECH Index (800700.HK)$ Surging 4.97%, marking its second-largest single-day gain in 2026.As of now, the Hang Seng Tech Index has risen more than 8% in July;While Japanese, South Korean, and broader Asia-Pacific equity markets faced significant pressure, Hong Kong stocks once again played the role of a 'safe haven,' posting gains against the market trend.

The immediate catalyst for this rebound is the global asset reallocation from high-valued to low-valued positions ('high-to-low rotation') as part of portfolio rebalancing.

As crowded trades in U.S. equities and Japanese/South Korean memory chips and semiconductors began to unwind, a wave of capital shifted toward Hong Kong equities, which are currently trading at relatively low valuations.Improved micro-level liquidity has become a key driver behind the market rally:According to Wind data, from July 6 to July 17, southbound capital recorded net inflows exceeding HK$36 billion for two consecutive trading weeks. As of the market close on July 28, total net inflows via southbound capital in July had already reached HK$77.51 billion, marking the second-highest monthly net inflow this year—second only to February.

Which constituent stocks led the charge?

Based on the latest data (July 2–29, 2026), during the strong rebound of the Hang Seng Tech Index, core constituents across the following three thematic sectors stood out most prominently, serving as the primary force driving the index higher against the broader market trend:

'AI × Hardware Ecosystem' – Xiaomi and Horizon Robotics lead the pack

$XIAOMI-W (01810.HK)$ Up 47.32% over the past 20 days, surging ahead as the top performer.Its core driver lies in the full-scale breakout of the 'smartphones × AIoT × new energy vehicles' triangular ecosystem.With Xiaomi's AI assistant deeply empowering end devices and deliveries of its SU7 series vehicles consistently exceeding expectations, the synergistic effect of 'hardware scaling + AI service monetization' is becoming increasingly evident, painting a highly certain high-growth blueprint for 'end-device AI' in the market.

$HORIZONROBOT-W (09660.HK)$ Up 28.68% over the past 20 days. As a pure-play leader in autonomous driving AI chips and algorithms, Horizon Robotics is seeing rapid expansion in vehicle installations of its Journey series chips, driven by accelerating adoption of intelligent vehicles in mainland China, making it a direct beneficiary of the dual narratives of 'domestic substitution in AI computing power' and 'intelligent driving.'

'Consumer recovery × AI-driven cost reduction' theme: Tech and traditional sector leaders rebound collectively

$MEITUAN-W (03690.HK)$ : Up 34.74%. With the food delivery subsidy war cooling down and Meituan accelerating AI adoption across delivery, customer service, marketing, and other functions to cut costs and boost efficiency, the market has started repricing its earnings recovery expectations.

$JD-SW (09618.HK)$and $JD HEALTH (06618.HK)$ : Up 27.15% and 21.80%, respectively. Their synchronized gains reflect the market’s renewed confidence in the monetization logic of 'e-commerce + vertical AI services.' Notably, JD.com’s AI integration across procurement, warehousing, and logistics has begun effectively reducing operating costs, with profit elasticity gradually emerging.

$TONGCHENGTRAVEL (00780.HK)$and $Midea Group Co., Ltd (000333.SZ)$ : Up 20.18% and 19.13%, respectively. The inclusion of these two stocks highlights the dual recovery narrative of consumer rebound expectations and AI empowerment of traditional industries. Tongcheng leverages the WeChat ecosystem to reach lower-tier markets, while Midea—through factory digitization and AI-powered smart home products—has become a Hong Kong-listed representative of the 'manufacturing + AI' story.

'New energy vehicles × intelligent driving' theme: Technology upgrades drive momentum

$BYD COMPANY (01211.HK)$and $LEAPMOTOR (09863.HK)$ : up by 29.19% and 22.33%, respectively. The market is shifting the investment narrative for 'new energy vehicles' away from pure sales growth and reanchoring it around the upgraded technological storyline of 'AI driving + smart cockpit.' BYD's 'God's Eye' intelligent driving system is being rapidly rolled out, while Leapmotor’s global partnership with Stellantis is opening new horizons—both companies are being repriced as 'AI car companies.'

What’s the outlook ahead?

$Hang Seng TECH Index (800700.HK)$ The strong performance in July largely reflected valuation recovery from previously depressed levels and global portfolio rebalancing. In the near term, the index is likely to remain in a pattern of 'repeated bottoming out with sector rotation,' but low valuations alone will struggle to sustain upward momentum during periods of shrinking risk appetite. Key variables to monitor over the medium term include:

Macro liquidity: Whether the pace of Federal Reserve rate cuts can materially unlock liquidity space for Hong Kong stocks;

Earnings delivery: Whether the upcoming mid-year earnings reports from major internet platforms can continue to beat expectations, particularly regarding the contribution of AI-related businesses to profitability;

Capital flow dynamics: Shifts in the flows of southbound capital and foreign institutional investors.

From a strategic perspective, the Hang Seng Tech Index currently offers a significant valuation advantage relative to the Nasdaq. As AI applications in China accelerate their real-world implementation, core companies are increasingly demonstrating their ability to monetize AI. For long-term investors, the Hang Seng Tech Index’s current position in a historically low valuation range—combined with strong earnings expectations among its constituents and record-high share buyback activity—may represent a key window for phased deployment.

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