From the peak on October 2, 2025, to March 2, 2026, the Hang Seng TECH Index experienced two rounds of valuation-driven deep corrections, with a maximum cumulative drawdown of 28%.
Huatai Securities believes that at the current moment, the trend reversal window for the Hang Seng TECH Index may still need to wait. AI expectation adjustments are nearing completion, but consumer profit expectations have yet to stabilize; the single factor of &#34;cheap valuation&#34; is insufficient to drive a sustained market. Quantitative calculations show that the stabilization range for the Hang Seng TECH Index is approximately between 4500 and 4850 points, with a neutral scenario around 4690 points, which is still some distance from the current position but with limited amplitude.
Analysts warn that the core contradiction in the current market is: while valuations have become reasonable, profit expectations have not yet bottomed out, and the narrative of &#34;cheap valuation&#34; alone is insufficient to drive a sustained index trend. The period from mid to late March to early April will be a concentrated verification period—capital expenditure guidance from major companies' earnings briefings, whether the internet &#34;subsidy war&#34; has peaked, and the dynamics of Sino-U.S. economic and trade relations will constitute the three key factors for whether a rebound can be realized.
<h2>Review of Two Rounds of Corrections: Distinct Nature, Different Emphases</h2>
Huatai Securities statistics show that since 2018, the Hang Seng TECH Index has fallen more than 20% on six occasions (including this round), with the current cumulative decline at -25.3% (peak at 6683 points, low at 4989 points), historically only surpassed by major systemic risk shocks such as internet antitrust (-68%), risks of Chinese concept stock delisting (-45%), and Sino-U.S. trade frictions (-43%).
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First Round (October 2, 2025—November 21, 2025): Lasting 50 days, with a decline of 19.3%, where valuation (PE) contributed -19.4% and earnings (EPS) contributed +0.1%, almost entirely dominated by valuation contraction.
This round has a clear global β attribute—Federal Reserve Chairman Jerome Powell issued hawkish signals, the U.S. dollar index rose from 97.8 to over 100, and major global tech indices simultaneously contracted in valuation.
Huatai believes that the deeper decline in the Hang Seng TECH Index is primarily due to the temporary escalation of Sino-U.S. trade frictions, as well as the consumer electronics, home appliances, and automotive sectors facing tariff pressures and significant downward revisions in fundamental expectations, while other global tech indices saw upward revisions in profit expectations during this period, further widening the gap.
Second Round (January 14, 2026—March 2, 2026): Lasting 47 days, with a decline of 15.6%, where PE contributed -16.7% and EPS contributed +1.1%.
In this round, the α attribute of the Hang Seng TECH Index is more pronounced—during the same period, the Korea Composite Index surged by 32%, and the Taiwan Weighted Index rose by 13%, with a clear &#34;soft-hard differentiation&#34; pattern.
Internet consumption and comprehensive platforms became the main drag: the intensified &#34;subsidy war&#34; during the Spring Festival led to increased competition; market doubts about the monetization ability of major companies' AI capital expenditures intensified; coupled with domestic &#34;anti-involution&#34; and &#34;anti-monopoly&#34; regulatory pressures, valuations were significantly compressed. In contrast, the automotive sector (leading companies' deliveries exceeded expectations in January-February) and semiconductors (the off-season in Q4 2025 was not dull) were relatively resilient.
<h2>Index Structural Characteristics: Heavy on Consumer Attributes, Low in Hard Technology Content</h2>
Huatai Securities stated that to understand the volatility logic of the Hang Seng TECH Index, one must first recognize its two core structural characteristics:
First, a high proportion of internet and software, with weak hard technology attributes. By market capitalization weight, internet comprehensive (19.8%), internet consumption (18.7%), and software and media (18.6%) together account for nearly 57%, far exceeding typical hard technology indices.
Second, significant consumer attributes. Internet consumption and automotive (18.3%) with consumer attributes, along with consumer electronics and home appliances (14.4%), together account for about 51%. The AI-tagged sectors (AI hardware + AI software) have a combined weight of less than 50%, with software weight higher than hardware. This structure determines that the Hang Seng TECH Index's response to AI narratives has a &#34;soft technology bias,&#34; with a deeper reliance on consumer sentiment.
The contributions from the two rounds of increases confirm the above judgments: during the DeepSeek breakout market (January to March 2025), the Hang Seng TECH Index rose 45% cumulatively, with major internet companies contributing 11%, consumer electronics and home appliances contributing about 10%, while the high-weight internet consumption lagged significantly; in the second round of revaluation (June to October 2025), major internet companies and semiconductors were the main drivers, contributing 10% and 8% respectively, while automotive, internet consumption, and consumer electronics and home appliances &#34;lagged behind.&#34;
<h2>Technology Approaching Completion, Consumer Still Has Hidden Concerns</h2>
Huatai Securities believes that in the technology sector, although AI hardware valuations have fallen 27% from their peak, they remain above the levels before the first round of DeepSeek revaluation, as the market continues to price the scarcity of domestic alternatives.
As of March 3, 2026, the future 12-month P/E for AI hardware is 32.6 times, having adjusted 27% from the peak on October 2, 2025, but still higher than the peak of the first round of DeepSeek revaluation, hovering around the central level of the upward revision range for computing power demand in the third quarter of 2025.
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The market is still actively pricing the scarcity of domestic AI hardware capacity and the potential for domestic alternatives, with the valuation center having shifted upward. Compared to the global market, the valuation premium of Chinese AI hardware has narrowed during the second round of adjustments, gradually completing the pricing of differences in advanced process expansion capabilities and downstream demand between domestic and foreign markets.
The valuation of the consumer sector has fallen to a pessimistic range, but the key contradiction lies in the fact that profit expectations have not yet stabilized—consumer electronics and home appliances are the most pressured sub-sectors, while automotive and internet consumption show initial signs of stabilization.
Currently, the strong consumer attribute sector has a future 12-month expected P/E of 15.3 times, significantly down from 20.3 times at the beginning of October 2025, lower than the level at the start of the new round of market in mid-June 2025, and with less than 5% downward adjustment space compared to the level during the panic from external shocks in April 2025. The pessimistic pricing on the valuation side is basically in place, but profit expectations remain the main contradiction—consumer electronics and home appliances face the greatest pressure, while automotive and internet consumption have shown initial signs of stabilization
<h2>Quantitative Assessment: Stabilization Target Range of 4500—4850 Points</h2>
Huatai Securities conducted a sensitivity analysis on the stabilization points of the Hang Seng TECH Index from a bottom-up perspective (excluding geopolitical variables):
<blockquote>
AI Software: The second round of revaluation premium has been largely digested. Based on this as a baseline scenario, the impact on the Hang Seng TECH Index is approximately -0.2%;
AI Hardware: Taking the low point before the main upward wave in September 2025 as the lower bound, in a neutral scenario (stabilizing after a 5% valuation downgrade), the potential impact on the Hang Seng TECH Index is approximately -0.7%;
Strong Consumer Attribute Sectors: Setting a 10% profit expectation downgrade upper limit, in a neutral scenario (stabilizing after a 5% profit expectation downgrade), the potential impact on the Hang Seng TECH Index is approximately -2.9%.
</blockquote>
Combining the three parts, the sensitivity matrix shows that the stabilization range for the Hang Seng TECH Index is approximately 4500 to 4850 points, with a neutral scenario around 4690 points.
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<h2>Rebound Conditions: Low Positions and Positive Catalysts are Both Essential</h2>
Huatai warns that southbound funds have been continuously &#34;buying more as prices drop&#34; since August last year, nearing parity. Once a rebound occurs, profits may be realized, limiting the rebound's elasticity.
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The report points out that a true rebound requires the resonance of three conditions: the peak of competitive expectations, positive application progress of large models from major companies, and stabilization of Sino-U.S. economic and trade relations. Before this, Huatai's Hong Kong stock sentiment index timing system—annualized excess return of over 11% since 2020—remains in a wait-and-see signal

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Huatai Securities believes that the trend reversal window for the Hang Seng TECH Index may still need to wait. The AI expectation adjustment is nearing completion, but consumer profit expectations have yet to stabilize; the "cheap valuation" factor alone is insufficient to drive a sustained market. The period from mid to late March to early April is a key verification window for catalysts, during which the performance briefings of major companies and the direction of macro variables will determine whether a rebound can be established

- From October 2, 2025, to March 2, 2026, the Hang Seng Tech Index experienced a significant pullback of 28%.  
- Huatai Securities indicates that while the AI expectations are nearing stabilization, consumer earnings remain uncertain, with the index's support range identified between 4500 and 4850 points.  
- Analysts warn that although valuations are becoming reasonable, the lack of stabilization in earnings expectations could hinder a sustained recovery, emphasizing the need for three key catalysts for a rebound.

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