South Korean stocks plunge, Hong Kong stocks surge—has the AI trading trend changed?

``` The Hong Kong technology sector saw a strong rebound on July 8th. Against the backdrop of global capital rotating from AI infrastructure-related markets to undervalued markets, Chinese tech stocks listed in Hong Kong recorded their largest single-day gains in 14 months. On Wednesday, the three major Hong Kong stock indexes opened high and moved higher, with internet tech stocks surging collectively. The Hang Seng Index climbed back above 24,000 points; the Hang Seng Tech Index jumped nearly 5%. The Hang Seng China Enterprises Index rose as much as 4%, marking its largest single-day gain since at least May 2025. At the individual stock level, Alibaba saw the most notable increase, at one point surging more than 11%. According to reports, Alibaba held performance pre-communications with analysts before releasing its earnings report. The cooperation between Lazada and Meta Platforms was viewed by analysts as a positive sign for Alibaba’s long-term profitability prospects, boosting market sentiment. Meanwhile, South Korea's Kospi index dropped as much as 4% in a single day, Japanese stocks also fell, and the Asian market saw pronounced capital rotation. This rally was driven by multiple factors: a global rebalancing of capital flows from the overvalued Korean and Japanese markets to the undervalued Hong Kong market, intensive progress from AI industry catalysts, and marginal shifts in regulatory policy. Flowing from Korea and Japan to Hong Kong stocks The core logic behind this Hong Kong stock rally is the regional rebalancing of global funds. Jason Chan, Senior Investment Strategist at Bank of East Asia, said: "The relative strength of Hong Kong stocks arises from global funds unwinding paired trades from AI infrastructure-related markets to undervalued and value stock markets." This rotation was particularly evident in regional markets. South Korea’s Kospi fell as much as 4% in one day, has declined 20% from last month's high and entered a technical bear market, with average daily swings exceeding 5%, keeping investors on edge. In the first half of this year, South Korea led the world thanks to strong profits from chipmakers, while Hong Kong’s tech giants only performed better than Indonesia. AI catalysts arriving intensively Tencent officially released its next-generation large model Hunyuan Hy3. Meituan announced the open-sourcing of its trillion-parameter large model LongCat-2.0. Zhipu AI launched and open-sourced its flagship large model GLM-5.2, which ranked among the world’s top three open-source models with a score of 51 on the Artificial Analysis composite leaderboard, and was ranked first globally in the Code Arena code evaluation system with participation from over a million users. On the index front, Zhipu and MiniMax were included in the Hang Seng Tech Index constituents as of June 8. According to estimates by Soochow Securities, the AI-related weight will rise from about 25% to 40%, potentially attracting $1.25 to $1.75 billion in passive capital inflows. Policy shift providing support There have also been marginal changes in policy. According to the Ministry of Industry and Information Technology website, seven departments jointly issued the "Action Plan to Promote Collaborative Development of Platform Economy Enterprises of All Sizes." Market participants believe this marks a shift in regulatory logic for the platform economy from "rectification and regulation" to "empowering innovation," which may help alleviate previous regulatory uncertainty that weighed on tech sector valuations. Liu Gang, Chief Overseas and Hong Kong Stock Strategist at CICC, pointed out in a research report on July 6 that Hong Kong stocks have fallen more than 30% from the peak last October, and the internet sector has dropped over 40%. Some leading stocks have dropped back to pre-September 24th levels. He also noted that the Hang Seng Tech Index valuation has fallen below one standard deviation of its historical average, and the scale of share buybacks by listed companies has reached a peak since "the 9·24 event." He believes the short-term rally was catalyzed by three factors: the decline in US Treasury yields, regional rebalancing of funds brought by tech market volatility, and marginal policy changes. Sustainability of the rebound in question, evident disagreements remain Despite the eye-catching single-day gains, there are obvious disagreements in the market as to whether this round of rebound can be sustained. The fundamental logic supporting the previous strength of the Korean market has not fundamentally changed—Samsung Electronics reported a 19-fold year-on-year increase in quarterly profits this Tuesday, and chipmakers’ earnings growth remains robust. In comparison, domestic internet giants such as Tencent and Alibaba have been under earnings pressure due to weak demand, a structural issue that is hard to reverse in the short term. Risk Warning & Disclaimer The market carries risks and investments should be made with caution. This article does not constitute personalized investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable to their particular circumstances. Investing based on this article is at one’s own risk. ```