On December 15, the Hong Kong stock market continued its adjustment trend since the fourth quarter, with major indices collectively weakening. The Hang Seng Index closed down 1.34%, further expanding the cumulative pullback since the October peak; the Hang Seng Tech Index performed even worse, falling 2.48% in a single day, reaching a phase low not seen in nearly two months. In terms of sectors, technology stocks and chip stocks became the main forces driving the decline, with Hua Hong Semiconductor (01347.HK) plummeting over 6%, Baidu (09888.HK) dropping more than 5%, and SMIC (00981.HK) falling over 4%, with the significant fluctuations of leading stocks dragging down the performance of the entire sector.
This adjustment of Hong Kong stocks is not an isolated event, but rather a result of the resonance of multiple internal and external factors. From the perspective of direct triggers, the adjustment of index constituent stocks has led to passive fund reallocation becoming a key driving force. The Hang Seng Index Company previously announced that the Hang Seng Hong Kong Stock Connect Software and Semiconductor Index will be renamed the Hang Seng Hong Kong Stock Connect Software Theme Index, and on December 16, it will remove SMIC, Hua Hong Semiconductor, and three other stocks. This adjustment directly led to passive funds tracking the relevant indices selling off in advance, compounded by the fact that southbound funds have accumulated a reduction of HKD 1.661 billion in SMIC and HKD 954 million in Hua Hong Semiconductor over the past seven days, further amplifying the fluctuations of individual stocks.
From a deeper perspective, the tightening of market liquidity and the weakening of profit expectations constitute the core logic of the adjustment. As a key indicator reflecting the tightness of funds in the Hong Kong market, the overnight Hibor has fluctuated significantly multiple times this year. Previously, the Hong Kong Monetary Authority bought over 109.5 billion Hong Kong dollars to stabilize the exchange rate, leading to continued pressure on bank system liquidity, directly limiting the space for the valuation of Hong Kong stocks to rise. At the same time, the recovery of profits for Hong Kong listed companies has not met expectations; since July, the price war among leading internet companies has intensified, and consumer demand has weakened, leading analysts to continuously downgrade profit expectations for the Hang Seng Index constituent stocks. The consensus EPS expectation for 2025 has been revised down to -1.4% to -2.7%, with more than half of the constituent stocks facing profit downgrade pressure, causing foreign capital to continue to flee, with net outflows reaching 131 billion Hong Kong dollars from August to October, making it difficult for inflows from southbound funds to fully offset this pressure.
The deep adjustment of the technology and chip sectors is also influenced by industry prosperity and the transmission of external sentiment. In the chip field, SMIC's guidance for gross margin in the fourth quarter has been lowered to 18%-20%, a significant drop from 25.5% in the third quarter, reflecting the operational pressure on mature process companies amid weak consumer electronics recovery. At the same time, concerns about an AI bubble have reignited, impacting tech stocks such as Nvidia and Oracle in the US stock market, with bearish sentiment transmitted to Hong Kong stocks. Additionally, US control policies over the chip industry have further intensified market concerns about the industry's development. The internet sector is constrained by increased industry competition and cost pressures, and the AI business investments of some giants have yet to generate scaled profitability, leading to a lack of clear support for short-term performance growth.
It is worth noting that the current adjustment of the Hong Kong stock market is still in a phase of correction within the overall strong market trend for the year. As of December 11, the Hang Seng Index has a year-to-date return of 27.27%, and the Hang Seng Tech Index has risen by 23.87% cumulatively, still performing well compared to major global markets. Institutions generally believe that the long-term positive logic for Hong Kong stocks has not changed: net inflows of southbound funds have exceeded 1 trillion yuan this year, gradually reshaping the pricing power of Hong Kong stocks; the valuation of core assets has become more attractive after adjustments, the traditional businesses of internet giants have gradually hit bottom, and the value of AI-related incremental businesses has yet to be fully priced; at the same time, global investors remain underweight in Chinese assets, and future adjustments in allocation ratios will bring long-term liquidity support.
Regarding the subsequent trends, the market will focus on three major variables: first, whether the pressure from passive fund adjustments will ease after the index adjustment on December 16; second, the pace of interest rate cuts by the Federal Reserve and changes in global liquidity, which will directly affect the valuation environment of Hong Kong stocks; third, the disclosure of annual report performance forecasts by listed companies, as improvements in profit data will be key to stabilizing the market. Institutions recommend paying attention to defensive opportunities in high-dividend sectors in the short term, while in the long term, investors can consider positioning in the AI industry chain and consumer recovery as certain main lines, seizing opportunities for valuation recovery of quality assets amid market fluctuations.
The phase adjustment of the Hong Kong stock market is essentially a concentrated digestion of short-term negative factors. Against the backdrop of unchanged long-term logic of liquidity support and profit improvement, oscillation and consolidation may become the main theme going forward. Investors need to rationally view short-term fluctuations, focus on corporate fundamentals and long-term industry trends, in order to seize genuine investment opportunities during market adjustments.
