Hang Seng plunges 385 points below bull-bear line; large model 'twin stars' surge 17% against trend: How will HK's structural market unfold?

Entering the second trading week of August, the Hong Kong stock market saw a concentrated release of pressure below the 26,000-point level. On August 6, the Hang Seng Index plunged 385.54 points in a single day, falling below the 250-day bull-bear line. On the morning of August 7, the index opened lower but then grudgingly turned positive. Within two days, the market presented a rare 'ice and fire' pattern — large model concept stocks soared continuously, while traditional heavyweight sectors such as insurance, real estate, and autos weakened collectively. Despite the sharp decline, funds did not leave; instead, they voted with their feet, seeking new structural directions.

HSI plunges 385 points in a day; pressure below 26,000 released

Closing data for August 6 showed the Hang Seng Index at 25,530.28 points, down 1.49%; the HSCEI fell 1.22% to 8,498.73 points; the Hang Seng Tech Index was weaker, down 2.28% to close at 4,820.78 points. Full-day main board turnover was approximately HK$255.227 billion, slightly lower than the previous trading day, but still in an active range.

Notably, the HSI closed below the 250-day bull-bear line (located near 25,729 points at the time) that day. Technically, this was another concentrated release of short-term rebound momentum after reaching a phase high of 26,187 points on August 4. Two main factors triggered the adjustment: first, overnight US chipmaker SanDisk's earnings outlook missed expectations, reigniting concerns about peaking AI hardware and memory demand, putting pressure on Asia-Pacific tech stocks collectively; second, reports that the mainland plans to levy taxes on individual overseas insurance policy gains triggered selling in the Hong Kong insurance sector, with AIA at one point falling over 9% intraday.

However, panic did not spread. On the morning of August 7, the HSI opened 3 points lower before rebounding, closing the morning session at 25,567 points, up 37 points or 0.15%, with half-day turnover of about HK$141.185 billion; the Hang Seng Tech Index rose 0.34% in tandem. Analysts believe the HSI may still test the 100-day moving average (around 25,191 points) in the short term, but funds have not fled in panic. Instead, they are rotating into fundamentally stronger names, with the market in a typical 'high-level consolidation, structural repositioning' phase.

Large model 'twin stars' surge against trend; domestic AI commercialization accelerates

The most striking performer in this adjustment was the consecutive surge of large model concept stocks. On August 6, MiniMax (00100) was officially included in the Stock Connect eligible universe and surged 17.1% on its first day, closing at HK$297.2; the following morning it rose another 17.7%, leading the market for two consecutive trading days. Another large model company, Zhipu (02513), also put in a strong performance, rising 17.57% in the morning session on August 7.

On the news front, DeepSeek recently signaled an overall upward adjustment to API service pricing, potentially by a significant margin. At the same time, the market heard that Alibaba's next-generation AI large model plans to charge commercial users. These two signals combined rapidly heated up market expectations for domestic large model commercialization. Institutional interpretations suggest this marks a shift in the AI large model industry's competitive logic from 'low-price market share grabbing' to 'comprehensive competition in capabilities, scenarios, cost, and monetization efficiency,' with the commercialization verification window now open.

For Hong Kong stocks, MiniMax's inclusion in Stock Connect with massive fund inflows on the first day is itself a result of the confluence of liquidity logic and industry logic. Estimates show that MiniMax may have received no less than HK$1 billion in allocation funds on its first day of inclusion; if Stock Connect holdings reach 20%-25% in the future, potential incremental funds could exceed HK$10 billion. This also partially explains why AI assets could move independently against the trend even on an index adjustment day.

Divergence within southbound capital: Selling heavyweights, snapping up new stars

Fund flow dynamics are equally intriguing. On August 6, southbound capital recorded net selling of approximately HK$1.461 billion through Stock Connect channels, ending the previous streak of net inflows. But further breakdown reveals this was not a systemic retreat, but rather a typical 'sell high, buy low' repositioning: Shanghai Stock Connect saw net inflows of about HK$3.257 billion, while Shenzhen Stock Connect saw net outflows of about HK$4.717 billion, showing clear internal divergence.

At the individual stock level, southbound capital's operational direction that day was quite clear:

• Large net buying: MiniMax approximately HK$2.697 billion, Kingboard Laminates HK$753 million, YOFC HK$593 million;
• Large net selling: Tencent Holdings HK$2.2 billion, Alibaba HK$1.627 billion, SMIC HK$1.076 billion, Xiaomi Group HK$322 million.

On one side were newly included high-beta AI targets; on the other, heavyweight tech stocks with larger prior gains. The capital rotation path was clear at a glance. Notably, southbound capital turnover that day was approximately HK$112.513 billion, still accounting for over 40% of total Hong Kong market turnover. Mainland capital's influence on Hong Kong stock pricing continues to strengthen, and 'Stock Connect expansion + AI new economy targets' is becoming one of the most important incremental narratives in the Hong Kong market.

Blue chips: two extremes — Wharf REIC surges after results, AIA slumps, dragging the index

Among blue chips, the most eye-catching stock on August 6 was Wharf Real Estate Investment Company (01997). The company released its 2026 interim results at midday, with shareholders' attributable loss narrowing sharply by 92.69% year-on-year. It also announced an increase in the payout ratio from 65% of underlying recurring core net profit to 90%, with the underlying dividend correspondingly rising 38%. Stimulated by this, Wharf REIC's share price jumped over 31% intraday and closed up 13.72% at HK$30, ranking first among blue-chip gainers that day, with continued gains of over 5% on the 7th. In the context of a weak interest rate environment and overall weakness in the property sector, the 'increased dividend + high yield' strategy once again gained capital recognition, also attracting some funds back from other high-yield property stocks.

On the other side, AIA (01299) came under pressure all day due to rumors that 'Hong Kong insurance policy gains will be subject to a 20% individual income tax,' closing down 5.92% at HK$73.15, dragging the HSI by approximately 73.9 points alone, making it the worst-performing blue chip of the day; Prudential also fell 4.57%. Some brokerages believe the market overreacted — Hong Kong insurance's structural advantages such as offshore asset allocation and multi-currency flexibility remain unchanged, but regulatory uncertainty will still pressure sector valuations in the short term. Additionally, CATL (03750) fell 5.05% due to second-quarter gross margins coming in below expectations, with lithium battery and auto stocks broadly declining. Meanwhile, coal stocks (Yankuang Energy up 6.12%) and gold stocks (Lingbao Gold up 4.82%) were active against the trend due to tight supply and high gold prices, reflecting notable market defensive sentiment.

Rebound or reversal? Institutions highlight two 'thresholds'

Regarding the nature of this rally, CSC Financial's latest view holds that Hong Kong stocks are indeed emerging from multiple pressures, but whether they can move toward a true long-term bull market requires crossing two important thresholds: first, sustained improvement in corporate earnings; second, substantive easing of dollar liquidity. The former determines the trend of the bull market, while the latter determines its magnitude and elasticity. Until both conditions are truly met, Hong Kong stocks are closer to the stage of 'the period of greatest pressure has passed, and valuation repair after overselling.'

In the short term, earnings signals released during the August results season, and whether negative factors such as insurance taxation can be quickly digested, will determine the support strength of the HSI near the 100-day moving average. In the medium term, incremental capital from accelerated AI application commercialization and continued Stock Connect expansion remains an important engine for structural rallies. For investors, rather than agonizing over whether the index-level move is a 'rebound or reversal,' it is better to focus on tracks with better earnings-valuation alignment — after all, in a market with intensifying divergence, structure often matters more than levels.