Hang Seng Index Falls 4.52%
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Hong Kong stocks extended their gradual decline this week before the sell-off accelerated on Thursday. The Hang Seng Index(HSI) fell 4.52% for the week, while the Hang Seng TECH Index(HSTECH) dropped 5.76% to a one-year low, down 35.75% from its one-year high. On the final trading day, turnover volume for the HSI and HSTECH exceeded their respective 50-day averages by 20.01% and 26.02%. The heavier volume accompanying the declines indicated a wave of panic selling.
The plunge in Hong Kong stocks reflected the combined impact of external risks and domestic factors. Externally, the unwinding of the U.S. AI trade triggered a global technology stock sell-off, with the Philadelphia Semiconductor Index tumbling 6.72% on Thursday. Although rumors of “cascading forced liquidations in leading AI stocks” were subsequently refuted, panic had already spread, directly hitting Hong Kong’s technology sector. Geopolitical risks in the Middle East escalated sharply. Reports suggested that the U.S. and Israel had finalized plans for another round of strikes against Iran, to be carried out after the November midterm elections. Houthi forces attacked the Saudi port of Yanbu, Brent crude surged past US$112.92 per barrel, and U.S. crude traded at US$99.1 per barrel. EIA crude inventories fell by 3.06 million barrels, a much larger draw than expected. Rising oil prices fueled inflation and rate-hike expectations. France’s 10-year government bond yield breached 5%, its highest level since 2002, while the French-German yield spread widened to its highest since 2011. Warnings of a “European debt crisis 2.0” weighed on global risk appetite. The Bank of Japan’s deputy governor signaled readiness to raise interest rates, with the October meeting set to formally assess whether the 2% inflation target had been achieved.
Domestically, GDP grew 4.6% year over year in the first three quarters, with third-quarter growth of 4.5% meeting expectations but pointing to a moderate recovery. September industrial value-added output rose 5.5% year over year, but total retail sales of consumer goods increased just 1.1%, while property development investment fell 20.6% year over year, underscoring persistently weak domestic demand. The Annual Conference of the Financial Street Forum delivered supportive policy signals. The central bank is studying a change in the policy interest rate “anchor” as it shifts toward price-based monetary management. The China Securities Regulatory Commission (CSRC) announced a package of measures, including the first batch of 18 actively managed ETFs, support for mergers and acquisitions in the securities industry, and new penalties for shareholding reductions that violate regulations. These measures offered near-term support but failed to offset external shocks. On October 21, loan prime rates (LPRs) remained unchanged for the 17th consecutive month, with the one-year rate at 3.0% and the over-five-year rate at 3.5%.
Among industry groups, the three strongest O’Neil industries were Bldg-Maintenance & Svc(G7340IG.HK), up 17.29% for the week; Chemicals-Basic(G2818IG.HK), up 6.25%; and Agricultural Operations(G1000IG.HK), up 5.26%. Bldg-Maintenance & Svc led the entire market, mainly benefiting from stronger expectations for a recovery across the property value chain and more active secondary-home transactions, which boosted demand for renovation and maintenance services. The floor area of electronically registered secondary-home transactions rose 10.7% year over year in the first three quarters, while secondary-home prices in first-tier cities increased month over month for seven consecutive months, providing fundamental support for services tied to the later stages of the property cycle. Chemicals-Basic benefited as Middle East geopolitical conflicts pushed up oil and commodity prices. A higher cost base for chemical products, combined with improving supply-demand conditions, supported a recovery in earnings expectations for related companies. Agricultural Operations was buoyed by increased attention to food security amid expectations of a strong El Niño and by rising agricultural commodity prices, with business conditions improving across the crop-production value chain.
The three major U.S. stock indexes diverged sharply this week. The Dow Jones Indus Actual(0DJIA) gained 1.66% as capital rotated back into value stocks. The S & P 500 Index(0S&P5)edged up 0.05%, retreating from its highs but remaining 5.10% above its 200-day moving average, which continued to provide support. The Nasdaq Composite(0NDQC) was the weakest performer, declining 0.50%.
The key drivers were the unwinding of the AI trade and a rotation toward value. Rumors of “cascading forced liquidations in leading AI stocks” triggered panic selling. Bank of America’s Bull & Bear Indicator dropped sharply from 8.1 to 7.4, falling below the 8.0 threshold, while the Magnificent Seven index declined 2.8%. Nevertheless, NVIDIA’s GTC conference in Berlin offered some highlights, including the launch of its modular AI factory, DSX POD, and capacity expansion agreements with six suppliers (substrate capacity +2.5 times, packaging +300%, and optical engines +15 times). These developments briefly lifted semiconductor stocks on Wednesday, but those gains were erased on Thursday. During earnings season, Tesla reported third-quarter revenue of US$28.05 billion, slightly below expectations. However, its gross margin recovered to 19.6%, and free cash flow of US$1.531 billion significantly exceeded expectations, helping its shares rise more than 3% on Wednesday. Initial jobless claims of 194,000 were better than expected, while September retail sales rose 0.8% month over month, also beating expectations. Economic resilience reinforced expectations that interest rates would remain “higher for longer.” Anthropic could file its S-1 registration statement as early as Friday, with an IPO potentially raising US$100 billion at a US$2 trillion valuation, which could make it the largest IPO in history. OpenAI was nearing completion of a US$30 billion funding round at a pre-money valuation of US$1.25 trillion. U.S.-listed Chinese stocks followed the technology sector lower, with the Nasdaq Golden Dragon China Index declining on multiple days during the week.
A-shares experienced a substantial correction. The CSI 300(000300) fell 1.57% for the week to a one-year low, down 18.94% from its one-year high.
By sector, high-dividend central state-owned enterprises in petroleum and petrochemicals, coal, and banking bucked the broader decline. ICBC and China Construction Bank reached new highs on Thursday. AI hardware, semiconductors, optical communications, and memory stocks underwent sharp corrections, with Eoptolink and Zhongji Innolight both posting steep declines on heavy volume. Humanoid robotics stocks surged on Tuesday and remained relatively resilient on Thursday. CATL plunged 12% on Wednesday, triggering broad declines across the new-energy value chain. On the policy front, the Financial Street Forum delivered a concentrated series of positive announcements: the central bank is studying a change in the policy interest rate “anchor”; the CSRC introduced the first batch of actively managed ETFs and new rules on shareholding reductions that violate regulations; the National Data Group was formally established; and the General Office of the CPC Central Committee and the General Office of the State Council issued guidelines on deeply integrating technological and industrial innovation. Economic data showed steady GDP growth of 4.6% in the first three quarters, but retail sales growth of just 1.1% and a 20.6% decline in property investment pointed to weak domestic demand. However, signs of stabilization in the property market strengthened: secondary-home transaction floor area rose 10.7%, unsold property floor area declined for seven consecutive months, and Shanghai secondary-home prices recorded their first year-over-year increase. Listed companies stepped up share buybacks and shareholding increases, with more than 30 Shanghai main-board companies announcing repurchases, concentrated in technology segments such as semiconductors and electronic materials.
The HK33 portfolio posted an average decline of 2.01% this week, with eight of its 33 constituents advancing and 25 declining. MOKINGRAN(02585) led with a weekly gain of 12.7%. It had an O’Neil Score of 79, an RS Rating of 97, an EPS Rating of 78, and an industry rating of 38, placing it among the preferred industry groups. The leading jewelry company demonstrated upside responsiveness amid market volatility. CRYSTAL INTL(02232) rose 4.2% for the week, with an O’Neil Score of 72, an RS Rating of 89, an EPS Rating of 93, and return on equity of 14.43%. The global apparel manufacturing leader benefited from stable overseas demand and order transfers. PLANETREE INT’L(00613) gained 0.97%, with an O’Neil Score of 69, an RS Rating of 97, an EPS Rating of 91, and an industry rating of 56. Its latest quarterly revenue increased 92.74% year over year, while return on equity reached 30.30%. Since inception, the portfolio’s cumulative return has continued to outperform the Hang Seng Index (HSI). The Model Portfolio, comprising one constituent, posted an average gain of 1.51% this week. BEONE MEDICINES(06160) rose 1.51%, with an O’Neil Score of 72, an RS Rating of 86, and an industry rating of 68. Its latest quarterly revenue increased 29.63% year over year, demonstrating the global biotechnology leader’s resilience amid a broader pharmaceutical sector pullback.
Technically, the Hang Seng Index(HSI) has fallen below all its moving averages, which are aligned in a bearish configuration. Thursday’s sharp, high-volume decline took the index below the 23,000 psychological level, leaving its near-term chart clearly weak. The heavy-volume sell-off signaled panic selling, although a technical rebound could follow once selling pressure subsides. Initial downside support is at the one-year low of 22,518; a break below that level could open the way toward 22,000. Initial resistance is near 23,500 and the five-day moving average, followed by the 24,000 psychological level. Strong resistance lies at the previous consolidation zone around 24,500. The Hang Seng TECH Index(HSTECH) has already reached a one-year low and is trading below all its moving averages, standing 20.53% below its 200-day moving average. Its medium- to long-term correction has deepened significantly. Support is around 3,750, with resistance at 3,900 and 4,100.
Southbound capital recorded net outflows of approximately HK$18.377 billion this week, marking a sharp reversal from the previous pattern of sustained net inflows. Net selling totaled HK$1.7 billion on Tuesday, HK$4.4 billion on Wednesday, and more than HK$9.2 billion on Thursday. The daily increase closely mirrored the decline in Hong Kong stocks. Tencent Holdings faced persistent net selling, including HK$1.7 billion on Wednesday alone. Continued southbound outflows indicated that mainland investors were reducing Hong Kong equity exposure to avoid volatility as external systemic risks increased. Meanwhile, the relative allocation appeal of Hong Kong’s dividend-paying assets became more pronounced in a high-interest-rate environment.
Global markets this week revolved around three themes: “the faltering AI trade and sharp technology stock declines,” “escalating Middle East geopolitical risks,” and “declining global risk appetite.” Hong Kong stocks corrected sharply under the combined pressure of technology stock selling and southbound capital outflows, with the Hang Seng TECH Index reaching a one-year low. Looking ahead, markets will focus on the policy direction signaled by the Federal Reserve’s October rate-setting meeting, developments in the Middle East and oil price trends, the pace of implementation of follow-up policies from the Financial Street Forum, and the valuation anchor that Anthropic’s IPO could provide for the AI industry. Attention is warranted on the defensive allocation value of high-dividend assets such as banks and utilities, as well as potential buy-on-dip opportunities following the deep correction across the AI value chain. The above analysis is based on publicly available data and market information and does not constitute investment advice. Markets involve risk; invest with caution.
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published on October 23, 2026