Big Short Burry: Now is the perfect time to bottom fish Hong Kong stocks.

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The bull-bear battle represented by Michael Burry is playing out in the Hong Kong stock market, with bullish voices continuing to converge.

Michael Burry, the investor who rose to fame by accurately predicting the 2008 US subprime mortgage crisis and served as the inspiration for the film "The Big Short," recently stated publicly that now is an "excellent opportunity" to seek cheap stocks in the Hong Kong market. His bullish logic is based on the anticipation that the global AI chip stock frenzy will cool down, believing that funds will flow out of Korea, Japan, and semiconductor sectors and turn to undervalued markets.

Meanwhile, Wang Yajun, Head of Goldman Sachs Asia Equity Capital Markets, also pointed out that the Hong Kong market has in essence entered the AI era, though the main indices have yet to reflect this reality.

Both viewpoints from different angles point to the same conclusion: there is a significant disconnect between the current sluggish performance of Hong Kong stocks and the real vitality within the market, and this very disconnect itself may be presenting an investment opportunity. For investors seeking undervalued assets, the appeal of Hong Kong stocks is on the rise.

Burry Bullish on Hong Kong Stocks: Valuation Opportunities as AI Hype Cools

Michael Burry, founder of Scion Asset Management, posted on X on July 17, "Now is an excellent time to look for cheap Hong Kong stocks, which should perform well as the shine comes off Korea, Japan, and SOXX (Semiconductor ETF)."

Burry's stance is supported by market context. Global chip stocks have recently been subject to large-scale sell-offs, with mounting doubts over whether AI companies can turn technological investment into real profits. Added to this are high capital expenditure pressures, which have put the previously surging semiconductor sector under pressure globally. In contrast, declines in Hong Kong stocks this year have made their valuations relatively more attractive.

It is worth noting that Burry has already taken action earlier this month—according to Bloomberg, he increased his holdings in Chinese e-commerce company JD.com and opened new positions in DraftKings and Flutter, indicating that his bullish stance on Hong Kong and related Chinese stocks goes beyond words.

Hong Kong Stocks Have Significantly Lagged Major Global Markets This Year

From the data perspective, the relative weakness of Hong Kong stocks is clear. The Hang Seng Index has fallen about 7% so far this year, and the Hang Seng Tech Index dropped even further by 15.22%, with the main drag being weak consumer spending and lack of confidence in the outlook for the Chinese e-commerce industry.

This stands in stark contrast to the strong performance of other major global markets. According to Bloomberg data, Korea’s benchmark index has soared 62% so far this year, fueled by the strong performance of two major chip giants; Japan’s Nikkei 225 index is up 26%; the iShares SOXX ETF tracking the semiconductor sector has rocketed 76%.

It is precisely this underperformance that makes Burry believe Hong Kong stocks present "bargain hunting" conditions—when global capital starts to reassess the sustainability of the AI craze, previously overlooked Hong Kong stocks may see a rebound opportunity.

Goldman Sachs: Distorted Index, Hong Kong Has Already Entered the AI Era

Goldman's perspective provides another dimension of interpretation—the malaise of Hong Kong stocks is, to some extent, a "misleading illusion" caused by structural index lag.

Wang Yajun, Head of Goldman Sachs Asia (excluding Japan) Equity Capital Markets, stated bluntly at a recent media session that the Hong Kong market has already entered the AI era, but the main stock indices have yet to reflect this reality. This is the root cause for the "stark contrast" between the booming IPO market and the sluggish index performance.

Wang pointed out that this year’s most active topic in the Hong Kong stock market is AI. The most actively traded, best-performing, and largest financing stocks are all AI-related. However, adjustments to index constituents take longer, resulting in a mismatch between the indices and the true market picture. He expects that Hong Kong’s total equity financing this year could hit an all-time high, and that IPO fundraising could surpass the 2021 historical peak, with even more AI companies set to come to market in the second half of the year.

On fundamentals, Wang believes that supported by growing end demand, AI companies' capital expenditures will continue, providing a foundation for the long-term performance of related sectors.

Converging Bullish Views, But Divergences Remain

Burry is not fighting alone. According to Bloomberg, Morgan Stanley has also recently called on investors to buy Hong Kong stocks, citing optimistic expectations for corporate earnings and believing that the impact of unlocked restricted shares will be relatively limited.

However, the bullish logic for Hong Kong stocks is not without challenges. The Hang Seng Index’s decline this year reflects ongoing concerns over the pace of China’s consumption recovery and the profit potential of the e-commerce sector; such structural pressures are unlikely to recede entirely in the short term. The "index-market mismatch" described by Goldman’s Wang Yajun also means that if ordinary investors only refer to the indices, they may both underestimate Hong Kong stocks' internal structural opportunities and overlook the continued pressure on traditional heavyweight stocks.

For investors, Burry’s bottom-fishing signal and Goldman Sachs’ AI narrative together outline a picture of opportunity in Hong Kong stocks, but how to accurately position oneself between overall index pressure and structural highlights remains the core issue facing the market.

Risk DisclaimerThe market has risks, and investment needs caution. This article does not constitute personal investment advice, nor does it consider individual users’ special investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular situation. Investments made accordingly are at one’s own risk. ```