Hang Seng Tech Index rebounds sharply, briefly breaks through pre-Middle East conflict levels

AI Question: Can the Hang Seng Tech Index continue its rebound amid declining trading volume?

On March 17, the Hang Seng Tech Index continued its nearly two-week rebound, briefly surpassing 5,200 points during the session, exceeding the pre-war levels before the U.S.-Iran conflict (closing at 5,138 points on February 27).

Structurally, the rebound is mainly driven by concepts like “Little Lobster” and other AI-related themes. Middle Eastern funds are considered one of the driving forces behind this market rally. Hong Kong Financial Secretary Paul Chan previously stated that efforts should be made to seize the opportunity of Middle Eastern capital inflows into Hong Kong.

Industry insiders interviewed by Yicai believe that while optimism persists, investors should consider several factors: on one hand, despite inflows of Middle Eastern funds, the trading volume of Hong Kong stocks has not significantly increased since the rebound began; on the other hand, the “Little Lobster” concept remains mainly at the idea stage, with no immediate impact on actual performance, raising doubts about the sustainability of the upward momentum.

Tencent Holdings (00700.HK) will disclose its Q4 2025 and full-year results on March 18, while Alibaba (09988.HK) will release its Q3 2026 (Q4 2025) earnings on the 19th.

Industry experts expect that after the tech giants announce their earnings, market reactions from large companies may dominate the trend. Once short-term geopolitical and other uncontrollable factors subside, the market could see this year’s best “bottom-fishing” opportunity.

Focus on Middle Eastern Capital Flows

After the escalation of Middle Eastern conflicts, Hong Kong Financial Secretary Paul Chan publicly stated that Middle Eastern funds might seek safety by flowing into Hong Kong, and the SAR government has prepared sufficient contingency plans. Under the current geopolitical landscape, Hong Kong faces both challenges and opportunities, with the financial markets benefiting relatively more.

On the morning of March 17, Hong Kong stocks rose, and after 10 a.m., the Hang Seng Tech Index briefly hit a high of 5,232 points before retreating. As of the time of writing, it fluctuated around 5,100 points.

Wen Tianna, CEO of Boda Capital International, told Yicai that the index continued its near two-week rebound, driven mainly by “Little Lobster” and related AI concepts. Major internet giants launched related products or support, sparking high enthusiasm for AI applications. Stocks like Tencent, Zhipu, and Minimax surged, lifting the overall tech index. Middle Eastern funds (sovereign wealth funds, family offices, etc.) may have accelerated inflows into Hong Kong for risk hedging, providing incremental capital support for the rebound.

Li Zeming, Chief Investment Officer of Blue Water Capital, believes that recent market rebounds show multiple positive signals. The market seems to be digesting concerns related to Middle Eastern tensions, with increasing reports of Middle Eastern funds flowing into Hong Kong for risk aversion. Investors also anticipate that the upcoming earnings reports from tech giants may bring surprises. After earnings are released, share buybacks could support stock prices. Although the “Little Lobster” concept has passed its peak hype, it still retains some momentum.

A fund manager from Guangzhou’s QDII told Yicai that the recent rise in the Hang Seng Tech Index has not been accompanied by increased trading volume, reflecting a battle among existing funds rather than new capital inflows. Historically, foreign capital like Middle Eastern funds tend not to participate heavily in “Little Lobster” concept stocks, which also lack short-term earnings visibility. Investors should also be cautious of risks stemming from the Middle Eastern situation, which could lead to reduced risk appetite and continued outflows.

Skepticism Over the Sustainability of “Little Lobster” Hype

Previously, Alibaba’s new version of Qianwen temporarily boosted the Hong Kong stock index. Alibaba surged for nearly a week from January 9 to 14 but then declined, dragging the Hang Seng Tech Index down for over a month. The sustainability of this “Little Lobster” hype remains questionable.

Cen Zhiyong, an analyst at Wutong Research Institute, said that Middle Eastern funds might seek safety by flowing into Hong Kong, but current trading volumes have not shown significant increases, and large-scale capital inflows are not evident. Regarding the “Little Lobster” concept, many voices worry about its safety and sustainability. Recently, aside from “Little Lobster,” stocks like BYD (002594.SZ, 01211.HK) and other new energy vehicle stocks have also risen since the Middle Eastern conflict, possibly due to consumers seeking alternative energy sources amid rising oil prices.

Li Zeming commented that although the market has been installing “Little Lobster” stocks over the past one or two weeks, the enthusiasm has not been user-friendly, and after the hype, user retention may decline sharply. For small- and mid-cap tech stocks relying on “Little Lobster” hype, investors should be especially cautious of potential pullbacks.

Wen Tianna added that the “Little Lobster” concept remains at the idea stage without actual performance support. While major internet companies are deploying ecosystems and educating users, most are at the stage of local deployment and simple automation, with limited commercial application. Short-term revenue growth is unlikely, as these are more strategic moves to capture market entry points.

He also noted that similar to Alibaba’s Qianwen release in January, the core driver was “concept first, performance lagging.” The current hype is driven by AI events, with short-term fundamentals hard to verify. However, the broader application scope, high participation of large firms, rapid open-source dissemination, strong social attributes, low valuations, and possible Middle Eastern capital inflows suggest that the current rally could outperform the January Qianwen-driven surge. The Hang Seng Tech Index may have short-term upward inertia (targeting 5,400–5,600 points), but is likely to enter a phase of high-level consolidation and rotation, shifting focus from pure concepts to AI computing power, overseas expansion, and valuation reassessment.

Shenwan Hongyuan analysts believe that since February, global liquidity shocks and recent Middle Eastern conflicts have caused a noticeable pullback in Hong Kong stocks. The ongoing rise in upstream resource prices has persisted for some time, and the performance gap between growth and value sectors has approached historical extremes. Overall, liquidity remains relatively ample, which supports market stabilization.

Liu Chenming, a strategist at GF Securities, stated that the likelihood of a global non-US asset bull market in 2026 remains intact despite geopolitical tensions. He remains optimistic about Chinese stocks. Once short-term geopolitical risks subside, the market could present the best bottom-fishing opportunity of the year.

(This article is from Yicai)