<p>Hong Kong tech stocks had a poor start in the Year of the Horse, with the Hang Seng Technology Index falling about 10% this month, marking the largest monthly decline since January 2024. Not only have mainland funds significantly reduced their holdings, but even Michael Burry, the character prototype from the film &#34;The Big Short&#34; who was optimistic about the rise of Chinese tech giants, lamented on social platform X that Tencent (0700) has seen its stock price stagnate over the past five years, in stark contrast to U.S. tech giants.</p>
<h2>Northbound funds sold over HKD 11 billion in two days, Baidu down 20% in a month</h2>
<p>According to Bloomberg, due to weak earnings and a lack of support from northbound funds, the Hang Seng Technology Index is currently deep in a bear market, down nearly 23% from its high in October last year. Market enthusiasm for Chinese internet giants has cooled, mainly due to high valuations and intensified competition, which continue to erode corporate profits. At the same time, more and more investors are shifting to chip manufacturers and AI startups, putting pressure on large tech stocks.</p>
<p>Data shows that mainland investors net sold HKD 7.4 billion through the Stock Connect today (27th), along with HKD 4 billion from the previous day, totaling over HKD 11.4 billion in outflows over two days, marking the largest scale of outflow since August last year. In terms of individual stocks, Baidu (9888) has been heavily impacted, with its stock price down over 19% this month due to weak core advertising and AI business. The market is holding its breath for JD (9618) and Bilibili (9626) to announce their earnings next week for more clues about industry prospects.</p>
<p>Ravi Wong, Vice President of Yinyuan Shichuang Family Office, stated that the market is shifting from a growth-at-all-costs model to one that pursues profitability and cash flow, punishing companies that are losing money or have low gross margins. He pointed out that due to the drag from AI investments and cost pressures, along with intensified competition making marginal growth more difficult, the Hang Seng Technology Index is facing concerns regarding profitability.</p>
<h2>Burry: Hong Kong's tech giants have risen, but the index is lower than in 2007</h2>
<p>In the face of the downturn in Hong Kong tech stocks, renowned hedge fund manager Michael Burry posted on X, pointing out that there are structural issues in the Hong Kong stock market. He noted that over the past decade, the revenues of Netflix, Broadcom (AVGO), and Tencent have grown 4.5 to 5 times, but the returns have been vastly different. He stated that Broadcom and Netflix have consistently led, but Tencent's return over the past five years has been almost exactly 0%.</p>
<p>He further stated that this is the crux of the problem. All major tech stocks in Hong Kong have become large since 2007, yet the Hang Seng Index is currently around 27,000 points, still 15% lower than in 2007.</p>
<h2>The driving force behind China's development comes from human nature</h2>
<p>Additionally, Burry shared an investor letter he wrote in 2005, in which he predicted that globally competitive companies would emerge from China. In the letter, he recounted a conversation with Lien Sheng-wen, son of former Kuomintang chairman Lien Chan, who said that the driving force behind China's development lies in human nature: &#34;When you give poor people opportunities, they will work hard.&#34;</p>
<p>Burry's letter also indicated that this is the true force driving China's development. Even though a loose credit environment may lead to overcapacity and severe corrections, the baptism of capitalism has allowed many Chinese entrepreneurs and workers to undergo trials, with many street-smart executives emerging, ultimately leading to the birth of globally competitive Chinese companies</p>

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<p>Hong Kong tech stocks performed poorly in February 2024, with the Hang Seng Technology Index falling by about 10%, marking the largest monthly decline in two years. Mainland capital significantly reduced holdings, and renowned investor Michael Burry pointed out that Tencent's stock price has seen no growth over the past five years, reflecting structural issues in Hong Kong stocks. Market enthusiasm for Chinese internet giants has waned, with investors shifting towards chip and AI startups. Baidu's stock price dropped over 19% due to weak performance. The market is focusing on the earnings of JD and Bilibili to seek clues about the industry's outlook</p>

- The Hong Kong tech sector has underperformed in the Year of the Horse, with the Hang Seng Tech Index falling nearly 10% this month, marking its largest monthly decline since January 2024.  
- Significant sell-offs from mainland investors and a lack of support have led the index to bear market territory, with a nearly 23% drop from last October's highs.  
- Investor sentiment is shifting towards chip manufacturers and AI startups, and expected earnings reports from JD.com and Bilibili may provide insights into the sector's future.

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TENCENT

ChinaAMC Hang Seng Technology ETF(QDII)

CAM HS TECH

Baidu

BIDU-SW

ISHARESHSTECH

Bilibili

Tencent Holdings Limited

Huatai-PB CSOP Hang Seng Technology ETF(QDII)

Tianhong Hang Seng TECH ETF(QDII)

CSOP HS TECH

JD-SW

Hong Kong tech stocks fell 10% in February, marking the worst performance in two years. "Big short" Burry laments: Tencent has zero returns over the past five years