Hang Seng Tech Index drops 3% as global tech selloff deepens

The Hang Seng Tech Index fell more than 3% intraday on Thursday, extending a global technology rout that began on Wall Street as investors questioned the near-term returns from record AI-related capital expenditure.

The decline tracked the previous session's selloff in US equities, where the S&P 500 dropped 2.21% and the Nasdaq Composite slid 2.2%, with big technology stocks bearing the brunt of the selling. The rout spread across Asia as market participants reassessed the payoff from massive AI investments. Four major US technology companies — Alphabet, Amazon, Meta Platforms and Microsoft — plan to spend as much as $720 billion this year, primarily on AI data centers, according to an Associated Press report.

Sunny Optical Technology Group led the decline among HSTECH components, plunging 12%. MINIMAX fell 7%, while Lenovo Group dropped 6%. The broad-based selloff hit most constituents of the technology-heavy gauge, with only a handful of names trading in positive territory.

The Hang Seng Index also declined, though the drop was more contained compared with the tech gauge. The broader benchmark came under pressure from technology sector weakness, with heavyweight Tencent Holdings (0700.HK) and Alibaba Group (9988.HK) both contributing to the downside.

Across Asian markets, the selloff was uneven. Japan's Nikkei 225 fell 0.4%, while China's Shanghai Composite declined 0.25%. South Korea's KOSPI, which had plunged 10% in the prior session amid a broad risk-off move, rebounded 3% as bargain hunters stepped in. Hong Kong's selloff was among the sharpest in the region, reflecting the tech-heavy composition of its benchmark indices.

The catalyst for the global equity selloff has been twofold. First, the US Federal Reserve's hawkish stance has pushed expectations for rate cuts further into 2026, with traders now pricing in fewer than two quarter-point reductions by year-end. Higher bond yields reduce the present value of future earnings, disproportionately hitting high-growth technology stocks. The 10-year US Treasury yield remained elevated, adding further pressure on richly valued technology shares. Second, the scale of AI-related capital spending — with the four largest US tech firms committing nearly three-quarters of a trillion dollars — has raised concerns about whether the returns will materialize quickly enough to justify the outlay.

The weakness in Hong Kong tech stocks also comes amid persistent concerns about China's economic recovery. The offshore yuan remained under pressure, with USD/CNH trading near the 7.30 level, adding to headwinds for Chinese equities. Foreign institutional investors have been net sellers of Hong Kong stocks through the Stock Connect program this year, with southbound flows failing to offset the selling pressure.

Traders are now watching for any stabilization in US equity futures ahead of the European session. The next major catalyst for Hong Kong markets will be the official and Caixin manufacturing PMI readings for June, due early next week, which will provide the latest snapshot of China's economic momentum.

This article is for informational purposes only and does not constitute investment advice.