Recently, the Hong Kong stock market has been a thrilling roller coaster, particularly during the week of February 14. The Hang Seng Technology Index exhibited dramatic fluctuations, showcasing just how surprising and exhilarating the market can be. On February 14, this index surged by an impressive 5.29%, closing at 5526.22 points, and demonstrating a staggering weekly increase of 7%, marking the highest growth in three years. Since the lowest point on January 14, the Hang Seng Technology Index has impressively risen by 30.56% in just a month.

The reasons behind this phenomenal growth are multifaceted. To begin with, AI has become the central narrative for the A-share and Hong Kong stock markets this year, propelled by the emergence of the dark horse DeepSeek in the AI sector. DeepSeek has stirred the market with its competitive edge of low costs and high performance, prompting investors to reassess the technological capabilities of Chinese companies in the AI race. This has set the stage for a potential value reassessment within the tech sector.

Furthermore, the partnership announcement between Alibaba and Apple served as a catalyst for this positive momentum. On February 12, reports surfaced indicating that Apple is collaborating with Alibaba to develop AI features for iPhone users in China. The next day, Alibaba’s co-founder, Joseph Tsai, confirmed the partnership rumors. This cooperation hints at a significant alignment between two technological giants from China and the US, suggesting a renewed potential for collaboration in the tech field. This partnership has positively influenced the valuation of tech stocks listed in both the A-share and Hong Kong markets.

Another factor stimulating the market is the shift in attitudes of international investors toward Chinese tech stocks. For instance, Alibaba’s recent market performance reflects this newfound optimism. Following breakthroughs in AI technology, foreign investors have gained renewed hope for the revival of Chinese tech stocks. Major international firms such as Goldman Sachs and Deutsche Bank have adopted a bullish outlook towards Chinese equities, perceiving that the valuation of Hong Kong stocks remains competitive and thus attracting foreign capital inflow.

The backdrop of economic recovery combined with AI advancements signifies a renaissance for the internet sector in Hong Kong. In recent years, various consumer-promoting policies have been implemented in mainland China, thereby stabilizing economic growth and laying a solid foundation for the Hong Kong market. The moderate loosening of monetary policy and proactive fiscal plans strengthen the operational environment for tech enterprises, high-end manufacturing, AI, and the semiconductor industry. There is a renewed confidence among investors, with notable successes in AI-driven enterprises such as DeepSeek paving the way for sustainable investment enthusiasm in the tech sector.

Delving deeper into monetary policies, the People's Bank of China has strategically adjusted reserve requirements and interest rates to influence market liquidity. A relaxed monetary stance enhances market liquidity, ultimately acting as fuel for stock price increases, while strict monetary measures may lead to liquidity constraints which could exert downward pressure on market performance. In terms of fiscal strategies, the government is leveraging infrastructure investment and tax reductions to stimulate economic growth, thereby raising profit expectations across various sectors.

Additionally, a consistent release of favorable industrial policies has characterized recent years, where the government has directed funds towards emerging sectors such as renewable energy, AI, and 5G technologies. These initiatives not only provide business opportunities for enterprises within relevant industries but also carve out fresh investment pathways for investors.

Moreover, there has been a consistent inflow of southbound capital into the Hong Kong stock market. By the end of 2024, southbound net purchases soared to a staggering 807.87 billion Hong Kong dollars, marking a 2.5-fold increase compared to 2023 and creating a historic record for annual net acquisitions. In January 2025 alone, monthly net inflows from southbound funds reached 125.6 billion Hong Kong dollars, the highest monthly figure since February 2021. On February 14, real-time purchases by southbound investors hit 8.7 billion Hong Kong dollars, culminating in total transaction volumes of 154.136 billion Hong Kong dollars by February 13. This influx has reinforced the resilience of Hong Kong stocks.

The current market conditions invite curiosity regarding future trends. Analysts maintain that the undervaluation of Hong Kong stocks remains a crucial advantage. Overall, the sentiment in the market is thawing, and the Hang Seng Technology Index is trading at historically low valuations. With a price-to-earnings ratio (P/E TTM) of just 22.69 times—lower than 78.19% of its history—Hong Kong stocks present an enticing value proposition that is drawing the attention of investors.

Quality internet enterprises in Hong Kong, such as Tencent and Alibaba, are enhancing their cost-effectiveness and growth potential. The internet sector is a vital component of the Hong Kong market, benefiting from fresh opportunities driven by the rapid development of 5G, artificial intelligence, and big data. In particular, sub-markets like cloud computing, fintech, and e-commerce exhibit substantial growth potential and investment value.

These leading internet firms continue to maintain robust profitability and growth rates through their expansive user bases and innovative business models. They are not only diversifying their operations into areas like cloud computing and fintech but are also pursuing mergers and acquisitions to enhance their competitive positions.

In light of the significant rise in market indices, some investors are taking profits, particularly within exchange-traded funds (ETFs). The capital outflows observed should not raise eyebrows, as it appears rational for investors to realize gains during such pronounced market surges. Nonetheless, it is crucial to note that the Hang Seng Technology Index has already surpassed the previous year's peak of 5649.27 points, resulting in customary practices where capital tends to withdraw during recovery phases.

Despite the current focus primarily being on the Chinese internet sector, mid-term perspectives reveal bullish growth for the Chinese tech industry and possible signs of recovery in the real estate sector—factors that are likely to sustain investors' appetite for Chinese assets.

Market analysts express caution though, explaining that despite the recent surge in the Hang Seng Index, it reflects a more structural market than in previous bull runs. Specifically, only about 20% of stocks have exceeded the index's performance, whereas more than 60% succeeded in past bull markets, which suggests a tighter range of drivers supporting the overall index.

The reasons behind the capacity of a select group of stocks to propel general market indices are clear. Firstly, the overall size of the Hong Kong stock market leans towards the smaller side. Secondly, the marketplace features a higher concentration of software and larger firms compared to A-share markets. Finally, the structured composition of the Hang Seng Index limits individual stock weightings to a maximum of 8%, thereby giving room for smaller-cap companies to exert a more significant influence on the overall index.

Notably, some analysts posit that this current market surge has merely attracted short-term foreign capital, with notable long-term foreign investment being conspicuously absent. Should emerging technologies provide solutions to existing macroeconomic leverage challenges, alongside supportive macro policies, this momentum could expand to encompass broader market segments; otherwise, a continued structural focus may prevail.

A recent report by Yangtze Securities illuminated that, amid the explosive growth in the "AI+" industry chain, Hong Kong stocks appear to be transitioning from a "dividend bull" market to an "AI bull" market. Over the past three years, valuations of technology and internet companies in Hong Kong have closely followed macroeconomic dynamics. However, with the shifts in the AI landscape, companies well-versed in these technologies may soon witness a revitalization, transitioning from value stocks to growth stocks. While performance realization may require some time, signs of valuation restructuring are already making their mark.

It's important to consider that cross-border ETFs operate under a T+0 trading mechanism (i.e., purchases made on the same day can be sold before settlement on that same day), thus reducing capital operation cycles and potentially introducing short-term volatility risks. Price movements in secondary market transactions do not necessarily reflect fund net value performance and should be taken as references; net values must be verified by the custodian bank.