Asian stock markets paused their recent rally on Wednesday, with technology shares in Hong Kong facing selling pressure. The Hang Seng Index slipped 0.1% to 22,944.24, while the Hang Seng Tech Index managed a 0.6% gain despite losses in significant components like Alibaba Group Holding and Meituan. The CSI 300 Index climbed 0.7% on the mainland, and the Shanghai Composite Index added 0.8%.
However, analysts cautioned investors about the potential for a near-term pullback. “Investors need to be vigilant of a pullback in the near term, given that the market is technically being overbought,” said Shen Fanchao, an analyst at Sheshang International in Hong Kong. There are concerns for the market, particularly the weak recovery in China’s economy.
Hong Kong tech stocks have surged 34% from a January low, driven by the DeepSeek-led rally.
However, some technical indicators suggest the rally may be overstretched. The 14-day relative strength index of both the Hang Seng and the Tech Index rose above 70 this week, a threshold often preceding a short-term pullback.
Hong Kong tech faces selling pressure
Futures on the Chinese Hang Seng Index (CHN.cash) experienced their most significant intraday loss since October, falling 1.5%. The decline was attributed to profit-taking on technology and AI stocks, which have recently become popular trades in emerging markets. Shares of major players like Xiaomi and Lenovo dropped by almost 5%, while SMIC saw a 3% decline.
The sell-off followed a significant rise in the Chinese technology benchmark in Hong Kong, which had surged by almost 4.2% earlier in the day. Bloomberg reported a low chance for stimulus surprises at the upcoming Two Sessions in March, leading investors to speculate that the recent rally could turn into a sell-the-news event. The Hang Seng tech index had reached a three-year high, buoyed by developments in Chinese AI and companies like DeepSeek.
As investors monitor the market for further developments, they also keep an eye on upcoming economic data and central bank decisions. The Reserve Bank of New Zealand delivered its third rate hike, initially weakening the New Zealand Dollar before it recovered against the USD. Market participants are also awaiting the release of the FOMC meeting minutes for insights into the Federal Reserve’s stance on rates and inflation.
