Since 2025, the Hong Kong stock market has experienced a meteoric rise, resembling a dazzling star in the global capital marketsThe Hang Seng Tech Index has surged dramatically, capturing the attention of investors worldwideNumerous international investment institutions are flocking to Hong Kong, keen to uncover the secrets behind this tech bull market and consider replenishing their positionsWhat lies behind this astonishing increase? Why are the technology stocks in Hong Kong soaring to new heights?
A remarkable increase has drawn attention
As of February 19, 2025, the Hang Seng Tech Index has exceeded a 25% increase, starkly contrasting with the U.SNasdaq index, which has seen less than 5% growthThe robust performance of the Hong Kong stock market stands outCompanies like Xiaomi and BYD, which are part of the Hang Seng Tech Index ETF (513180), have joined the trillion-dollar club, achieving record highs since their listingsLikewise, Tencent and Alibaba have seen their market values return to historical peaks, reflecting a remarkable market performanceOn the surface, this resurgence indicates a renewed confidence in Chinese tech companies, but deeper factors are at play.
Technological innovation spurred by Deepseek
Behind the surge in Hong Kong tech stocks lies a significant breakthrough in Chinese technological innovation, prominently highlighted by the emergence of Deepseek
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Previously an unknown entity, Deepseek has created a wave in the tech industry with its AI model that surpasses OpenAI, all while costing only a tenth of what OpenAI's technology requiresThis significant leap showcases that in certain domains, Chinese tech innovation has not only caught up but has even surpassed established players.
Such developments have greatly bolstered investor confidencePreviously, the valuations of Chinese tech companies were relatively modestThe price-to-book ratio (PB) of major companies within the Hang Seng Tech Index ETF stands around 2.1 times, one of the lowest in nearly a decadeThis situation represents a “golden pit” well-prepared for long-term investorsAmidst global capital excessively concentrated in a handful of tech giants in the U.S., accumulating risks are palpableFor instance, Nvidia's stock has seen considerable volatility; should there be a sudden drop, significant funds could be forced to sell offConsequently, many hedge funds are gravitating toward the Hong Kong market, valuing the low valuations and immense growth potential of Chinese tech stocks.
Macroeconomic improvements boost economic recovery
The improvement in the macroeconomic environment in China also serves as a key driver for the rise of the Hong Kong stock marketIn January 2025, the central bank released impressive macro data: the balance of M2 grew by 7% year-on-year, and the social financing scale increased by 8%. The increase in social financing amounted to 7.06 trillion yuan, reaching a record high for the same period historically
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This indicates that the Chinese economy is steadily recovering, and the effectiveness of the government's fiscal and monetary policies is becoming evident, with ongoing support for private enterprises and consumer spending.
The Chinese government increasingly focuses on stimulating the development of private enterprises, which holds significant implications for technological innovation and consumption upgradesThe cash inflows not only invigorate the Hong Kong stock market but also enhance the value of Chinese tech companies, injecting powerful momentum into the bull market in Hong Kong.
Global macroeconomic changes create favorable conditions
Changes in the global macroeconomic landscape have also provided solid support for the Hong Kong stock marketOn one hand, geopolitical tensions have eased, with conflicts such as those in Ukraine and Gaza entering peace negotiations, thereby reducing geopolitical risks and decreasing the demand for safe-haven investmentThis has led to a resurgence in risk appetite within the capital markets, consequently directing funds toward growth-oriented markets, with Chinese tech companies emerging as favored recipients.
On the other hand, the global trend of interest rate cuts has further favored the stock marketSince 2024, numerous countries have initiated rate cuts, with the U.S. progressively loosening its monetary policiesThe reduction in interest rates has increased market liquidity and lowered the cost of funds, prompting more capital to flow into risk assets, particularly high-growth sectors like tech stocks
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As China’s international financial hub, Hong Kong has naturally become a hotspot for such investment.
Unique charm of the Hong Kong market
The allure of the Hong Kong stock market stems from its unique market environment and international backgroundAs a prominent global financial center, Hong Kong attracts substantial international capital, with southbound capital flows particularly notableYear-to-date, southbound capital has registered a net inflow of 3.8 trillion HKD, with nearly 185.3 billion HKD of net inflow occurring just in January 2025, almost matching the total from the previous fourth quarter and largely directed towards Chinese tech companies listed in Hong KongThis underscores the heightened attention that global investors are giving to the Hong Kong market.
Moreover, the structure of the Hong Kong stock market provides a vast stage for tech companiesUnlike the U.S. market, the Hong Kong stock market caters to both mature large enterprises and offers opportunities for emerging companies and tech unicornsRenowned companies like Tencent, Alibaba, Xiaomi, BYD, along with up-and-coming firms like Horizon Robotics and UBTECH, have all chosen to list here, and their stellar performances have propelled the entire market upward.
The tech bull market in Hong Kong is no fluke; it represents the rise of Chinese technology and the transformation of global capital marketsAs technological breakthroughs continue to emerge, Chinese tech companies are gaining increasing importance on the global stage, coupled with favorable macroeconomic conditions and global dynamics
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