Hong Kong stocks surged sharply then reversed to a slow decline, the Hang Seng Index fell to March lows, and Tech Stocks fell into the danger zone.

On December 16th during Asian trading hours, the Hong Kong stock market experienced a sharp rise followed by a rapid decline. The Hang Seng Index ultimately fell by 1.9% to 25,139 points, hitting a three-month low since September 4th. Out of 89 constituent stocks, only 5 advanced, and the wide range of declines caught investors off guard. Among them, the Hang Seng Tech Index declined even more sharply, dropping 2.4%, with heavyweight stocks such as Tencent (HK$594.5, down 1.4%), Alibaba (HK$143.3, down 3.6%), Semiconductor Manufacturing International (HK$62.35, down 3.6%), Zijin Mining (HK$32.88, down 4.6%), and China Hongqiao (HK$30.08, down 5.8%) all falling. South Korea’s KOSPI and Taiwan Weighted Index were also affected, with declines within 1%, and securities stocks suffering the heaviest losses.

Weak Economic Data Shatters Market Expectations

The fundamental reason for this correction points to China’s economic slowdown. The economic data released in November made it difficult for investors to remain optimistic—retail sales grew only 1.3% year-over-year, well below the expected 2.9%, and hitting a post-pandemic low; fixed asset investment continued to decline, and the housing market showed no signs of recovery. These key indicators indicate weak consumer momentum and cast doubt on the sustainability of domestic demand recovery.

The deterioration of China’s economic fundamentals directly impacts corporate earnings expectations, with overvalued Tech Stocks and financial stocks bearing the brunt. Some investors worry that without clear policy support measures, downward pressure on the market will persist. Nomura Holdings China economist Lu Ting even predicts that China’s GDP growth rate may fall to 4.1% in the first half of 2026, requiring Beijing to implement stimulus measures such as a 10 bps rate cut and a half percentage point reduction in reserve requirements.

External Uncertainties and Internal Concerns Intertwine

The fragility of the Hong Kong stock market also reflects external variables. Investors generally adopted a wait-and-see attitude ahead of the US November non-farm payroll report, fearing that strong employment data could weaken the Federal Reserve’s rate cut expectations and further depress valuations of global Tech Stocks. This cautiousness, intertwined with internal factors, led to widespread market sell-offs.

Hao Hong, Chief Investment Officer of Lotus Asset Management, pointed out that Beijing’s stimulus policies are expected to focus on consumption, and the relative performance of non-Tech Stocks is likely to continue for at least one quarter. From a valuation perspective, China’s overall P/E ratio is only about 12 times, making it attractive, but the lack of earnings upgrades and retail fund inflows results in a strong risk-averse sentiment. In contrast, A-shares benefit from domestic policy expectations and show more resilience; Hong Kong stocks are more exposed to global capital flows and are susceptible to US market movements.

Investment Strategies and Risk Warnings

For Taiwanese investors, this is a good time to reassess their portfolios. In the short term, volatility in Hong Kong and Asian stocks is expected to intensify. It is advisable to avoid high-valuation Tech Stocks and shift toward defensive consumer or value stocks, especially those benefiting from China’s stimulus-driven domestic demand. In the long run, if Beijing indeed ramps up fiscal stimulus in the first half of 2026 as expected, valuation recovery in Chinese stocks could be substantial, and the lagging performance of the Hang Seng Tech Index may reverse.

However, risks remain. Melody Lai, an analyst at SPDB International, reminds that current sentiment is volatile and not an ideal entry point. If US employment data remains strong and rate cut expectations diminish, risk assets could be further pressured. Value Partners remains optimistic about the long-term growth potential of AI and Tech, but remains冷 on consumer sectors.

Overall, this round of correction in Asian stocks reflects the pain of macroeconomic transition—China’s growth concerns and Tech Stocks rotation intertwine, testing investors’ patience. It is recommended to closely monitor Federal Reserve movements and Beijing policy details, maintain diversified allocations, and look for potential rebound opportunities. After all, in uncertain markets, adjustments often give rise to the next wave of opportunities.