Analysis of Southbound Capital Allocation Strategies Amid the Correction of Hong Kong-listed Technology Stocks

Based on the latest market data and institutional research perspectives, I will systematically analyze southbound capital allocation strategies against the backdrop of corrections in Hong Kong-listed technology stocks.

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According to real-time data, Hong Kong stocks traded weakly at midday break, with the Hang Seng Index down 0.99% and the Hang Seng Tech Index down 1.15%, continuing the recent correction trend [0]. Major tech leaders are generally under pressure:

Stock	Ticker	Closing Price	Daily Decline	52-Week Gain	P/E Ratio	ROE
Tencent Holdings	0700.HK	$610.50	-1.13%	+56.62%	24.53x	20.29%
Alibaba Group	9988.HK	$160.70	-3.31%	+90.07%	21.98x	12.16%
Meituan	3690.HK	$99.05	-0.95%	+2.85%	18.90x	18.5%

From the market perspective, sector divergence is evident: transportation, oil and petrochemicals, and consumer sectors performed well, while pharmaceuticals and biotechnology, paper packaging, and media sectors recorded larger declines [0]. As a high-beta sector, technology stocks are the first to be hit when market risk appetite declines.

From a technical analysis perspective, the Hang Seng Tech Index has continued to correct since December 2025, pulling back from around the 3,850-point high to the current level of around 3,420 points, representing a decline of over 10%. The short-term moving average system shows a bearish formation, with the index seeking support in the 3,400-3,500 point range [0].

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Despite the continuous correction of Hong Kong-listed technology stocks, southbound capital has maintained counter-trend buying:

• Today’s Performance
  : Southbound capital recorded a net purchase of HK$2.99 billion, indicating strong buying interest from mainland investors [0]
• Weekly Cumulative
  : Southbound capital recorded a total net inflow of nearly HK$9 billion this week [1]
• Key Targets for Position Increasing
  : Tencent Holdings saw a net inflow of over HK$5 billion from southbound capital, with obvious position increases also seen in other tech leaders such as Alibaba Group and Meituan [1]

Institutions such as Sinolink Securities believe that Hong Kong stock investments in 2026 should adopt the three-dimensional investment framework of “Technology - Resources - Dividends”, with specific strategy recommendations as follows [2][3]:

• Core Allocation (40%-50%)
  : Take high-dividend assets as the core allocation, including telecom operators (China Mobile), large state-owned banks and insurance institutions, utilities and infrastructure operators, to provide portfolio stability and basic returns
• Satellite Allocation (25%-30% each)
  : Technological innovation and resource cycle sectors to capture structural opportunities

Capital allocation is shifting from pure growth to a balanced “Growth + Value” allocation, with a particular preference for core Chinese assets with global competitive advantages and reasonable valuations [2]. Southbound capital is expected to maintain a net inflow trend in 2026, with the full-year scale projected to grow by 15%-20% compared to 2025 [2].

Institutions focus on the following segmented tech tracks:

1. Core Targets in the AI Industry Chain
   : Basic model developers, computing power infrastructure providers
2. Domestic Substitution in Semiconductors
   : Design, manufacturing, and equipment enterprises, particularly in the memory chip and wafer foundry segments
3. Consumer Internet Platforms
   : Platform enterprises with data advantages, such as Tencent and Alibaba

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From the valuation perspective, Hong Kong-listed technology stocks have returned to a relatively reasonable range:

Indicator	Tencent	Alibaba	Meituan	Industry Average
P/E Ratio (PE)	24.53x	21.98x	18.90x	~25x
P/B Ratio (PB)	3.86x	2.58x	-	-
Earnings Growth	Above expectations (+7.85%)	Below expectations (-37.50%)	-	-

• Tencent
  : The latest quarterly results exceeded expectations, with EPS of $8.24 (vs. expected $7.64), and revenue growth of 2.13% also exceeded expectations [0]
• Alibaba
  : Quarterly results fell short of expectations, but 87.5% of analysts still give a “Buy” rating [0]
• Meituan
  : Has the lowest valuation (18.9x), with a certain margin of safety

Comprehensive analysis suggests that the current correction in the tech sector provides a favorable buying opportunity, for the following reasons:

• As a bridge connecting China and global capital markets, Hong Kong stocks’ valuation advantage will become more prominent
• As the pace of domestic economic recovery accelerates, coupled with the shift to loose monetary policies in major overseas economies, the liquidity environment will improve significantly [2]

• The fundamentals of leaders such as Tencent and Alibaba remain robust, and the competitiveness of tech enterprises continues to improve amid the AI wave
• Meituan’s local life business has a deep moat, and its valuation has become attractive

• Mainland investors are increasing positions in tech leaders against the trend, indicating recognition of their medium- to long-term investment value
• Foreign capital inflow will become a new highlight; as China’s economy stabilizes and rebounds, overseas long-term capital will gradually return to the market [2]

Investors need to pay attention to the following risk factors:

• Short-term Volatility Risk
  : The high-beta nature of tech stocks leads to significant short-term volatility
• Earnings Falling Short of Expectations
  : Earnings fluctuations of some tech stocks may affect short-term performance
• Geopolitical Factors
  : Changes in the international situation may affect market risk appetite

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For the tech sector, it is recommended to adopt the

strategy:

• Current valuations have returned to a reasonable range, so left-side layout can begin
• It is recommended to buy in 3-4 batches to average out costs
• Focus on core leaders such as Tencent, Alibaba, and Meituan

Sector	Recommended Allocation Ratio	Core Logic
Tech Growth	30%-35%	AI, semiconductors, internet leaders
High Dividend	40%-45%	Telecom, banking, utilities (defensive allocation)
Resource Cycle	15%-20%	Energy, non-ferrous metals (inflation hedge)
Consumer & Pharmaceutical	10%-15%	Accumulate high-quality consumer and pharmaceutical targets on dips

:

• Tencent Holdings (0700.HK)
  : Strong fundamentals, earnings exceeded expectations, leading AI layout, reasonable valuation of 24.5x
• Meituan (3690.HK)
  : Local life leader, lowest valuation (18.9x), with a high margin of safety

:

• Alibaba Group (9988.HK)
  : Although under earnings pressure, it has strong valuation appeal, with 87.5% of analysts giving a “Buy” rating
• Xiaomi Group (1810.HK)
  : Representative of hard technology, benefiting from the development of AIoT and new energy vehicle businesses

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is mainly reflected in the following aspects:

1. Counter-trend Capital Layout
   : Southbound capital continues to record net inflows, indicating recognition by mainland investors of the medium- to long-term investment value of tech leaders, with Tencent seeing a net inflow of over HK$5 billion this week

2. Adjustment of Allocation Strategies
   : Institutions recommend shifting from pure growth allocation to a balanced “Growth + Value” allocation, adopting the “Core + Satellite” strategy with high-dividend assets as the defensive core

3. Judgment of Buying Opportunity
   : The current correction in the tech sector indeed provides a favorable allocation window, for the following reasons:
   • Valuations have returned to a reasonable range (24.5x for Tencent, 18.9x for Meituan)
   • Fundamental support remains (Tencent’s earnings exceeded expectations)
   • Southbound capital continues to buy against the trend
   • The liquidity environment is expected to improve in 2026

: Tech stocks have significant short-term volatility; investors should control positions, diversify allocations, and adopt phased position building strategies to balance returns and risks.

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[0] Jinling AI Market Data (Real-time Quotes, Listed Company Profiles, Index Performance)

[1] Securities Times Network - “Major Move by Global Memory Chip Leader! Tech Giant Sees Significant Position Increase from Southbound Capital” (https://www.stcn.com/article/detail/3598574.html)

[2] CLS - “Hong Kong Stock Valuation Restoration Rally Launched; Institutions Say Investment Framework May Undergo Restructuring” (https://www.cls.cn/detail/2260055)

[3] Jiu Fang Zhi Tou - “Hong Kong Stock Valuation Restoration Rally Launched; Institutions Say Investment Framework May Undergo Restructuring” (https://www.9fzt.com/9fztgw_1_top/306eb6eabbcd40c4fd35d87c9354fc70.html)