The more it falls, the more funds enter? A chart explaining the divergence moment of Hang Seng Tech

Questioning AI · Capital flows into ETFs against the trend, what investment logic is behind this?

Since 2026, the Hang Seng Tech Index has continued to decline, with a drop of nearly 30% in the range, performing relatively weak among major global technology indices. However, in contrast to the index’s decline, funds have been continuously flowing into related ETF products. Against this background, market disagreements at this stage have significantly increased.

This issue is systematically analyzed through a visual chart based on the latest data and structural breakdown.

Since October 2025, the Hang Seng Tech Index has fallen approximately 30% in total, while other major tech indices have performed relatively steadily during the same period. Structurally, this round of adjustment is not a short-term fluctuation but a phased decline formed under multiple factors. These include changes in the global liquidity environment, adjustments in industry growth expectations, and fluctuations in market risk appetite, all affecting index performance. In the tech sector dominated by expectation-based pricing, changes in expectations often amplify price volatility.

Looking at component stock performance, this decline is not due to the drag of individual heavyweight stocks but a systemic correction. The internet platforms, hardware technology, and new consumer technology-related companies involved in the index are under pressure overall, and the fluctuation is not caused by a few companies but by synchronized adjustments across multiple sub-sectors. This phenomenon reflects the market’s ongoing reassessment of growth pace and profitability expectations for related industries.

From a valuation perspective, the Hang Seng Tech Index’s price-to-earnings ratio percentile has fallen to about 20%, and the price-to-book ratio is also close to historically low levels. Overall, valuation levels have significantly retreated from previous highs, indicating that the market’s pricing of uncertainty has become more adequate. However, low valuation does not necessarily mean short-term trend changes; subsequent movements still need to be judged comprehensively based on fundamentals and market environment. In other words, the question of “whether it is expensive or cheap” has been largely answered — current prices are somewhat attractive, but the more critical issue is whether earnings can support valuation recovery.

It is worth noting that during the index correction, the scale of related ETF products has continued to grow. According to publicly available data, since October 2025, fund flows have been predominantly net inflows, with a cumulative net inflow exceeding one trillion yuan, and inflows have increased during periods of greater index volatility. Behind this behavior lies the logic of long-term capital based on valuation and long-term allocation value, adopting a counter-cyclical layout.

The market currently does not lack upside potential but lacks “ignition signals” to trigger a rally. From a fundamental perspective, although some constituent companies still maintain revenue growth, profit margins are generally under pressure, and profit turning points are not yet clear, which is a core factor constraining valuation recovery. Additionally, macro-level factors such as the interest rate turning point (liquidity easing) and marginal changes in market risk appetite are also key variables. Only when “profit improvement + liquidity easing + sentiment recovery” resonate together can the market truly start.