Tencent's short-selling shares have plummeted by nearly 60% over the past three days, while southbound funds are buying against the trend, potentially establishing a short-term bottom.

Ask AI · Short-selling cools down and cash inflows resonate—when is a rebound opportunity for the tech sector?

Cailian Press March 24 (Editor Hu Jiarong) In the last part of March 2026, Hong Kong’s tech sector saw violent fluctuations before a recovery in sentiment. After the short-selling data for three major core assets—Tencent Holdings, Alibaba, and Xiaomi Group—posted an explosive surge earlier in the month, it showed a clear decline on March 23. Meanwhile, Stock Connect southbound capital made a large net inflow against the trend, and the Hang Seng Tech Index showed a modest rebound today.

“Short-selling volume” of tech giants cools in sync

Tencent’s short-selling pressure eases sharply, with a drop of over 60%

Tencent Holdings’ short-selling data saw the most dramatic changes, indicating a rapid retreat by short sellers.

Share count change: From 8.2963 million shares at the peak on March 19, it fell sharply to 3.2390 million shares on March 23, with a decline of 60.95%.

Amount change: From HK$4.356 billion, it dropped to HK$1.622 billion, with a decline of 62.76%.

Notably, in the week prior, driven by concerns about capital expenditures after earnings, Tencent’s short-sold share count had surged from 2.4538 million shares on March 17 to 8.3963 million shares on March 20, an increase of over 240%. This rapid pullback suggests that the market’s panic selling pressure after “good news being realized” for Tencent has already been fully released.

Alibaba’s short-selling scale moves down moderately, but the game is still ongoing

Although Alibaba’s short-selling data is trending downward, its absolute scale remains high, indicating that market divergence is still present.

Share count change: From 29.6607 million shares on March 18, it decreased to 24.8744 million shares on March 23, a decline of about 16.13%.

Amount change: The short-selling amount fell from HK$4.109 billion to HK$2.972 billion, a decline of 27.67%.

Before that, Alibaba just released its earnings report earlier the other day, and the stock price at one point came under pressure and slid to a low of HK$123.70. Even though short-selling data has eased, the short-selling amount near HK$3 billion suggests that some short sellers are still waiting for a clearer recovery signal, or are staying cautious about its cloud business and the competitive landscape in e-commerce.

Xiaomi Group: short-selling data falls ahead of the earnings report

Ahead of the key timing when Xiaomi Group is about to release its annual report, its short-selling data showed a noticeable pullback.

Share count change: From the high of 124.8930 million shares on March 20, it fell to 92.3272 million shares on March 23, a decline of about 26.08%.

Amount change: The short-selling amount dropped from HK$4.249 billion to HK$2.972 billion, a decline of 30.05%.

The market expects Xiaomi to release its results after market close on March 24. The decline in short-selling data may mean that some short sellers chose to take profits before the earnings release, to avoid the risk of a short squeeze triggered by results coming in above expectations.

Southbound capital “sweeps in” against the trend, offsetting short-selling pressure

In sharp contrast to the volatility in short-selling data, southbound capital has recently shown a firm willingness to go long.

According to related data, even just on March 20 alone, southbound capital net bought Xiaomi Group for HK$2.459 billion, Alibaba for HK$2.037 billion, and Tencent Holdings for HK$679 million.

Analysts have pointed out that this “short sellers retreat and longs enter” scissor-gap phenomenon often signals that a short-term bottom has indeed been established. Mainland capital uses the panic sentiment in the Hong Kong stock market for left-side positioning, believing that the valuations of tech giants are extremely attractive.

Previously, the adjustments in Hong Kong’s tech sector were attributed to four pressures: global liquidity, the industry cycle, capital preferences, and earnings expectations. However, with Tencent and Alibaba’s earnings reports landing, the “bad news fully digested” effect has emerged. Market focus is shifting from simply worrying about earnings performance to expectations about AI technology implementation, the strength of share buybacks, and the U.S. Federal Reserve’s shift in monetary policy.

(Cailian Press Hu Jiarong)