HSCEI enters bear market as HSI drops 432 points to 1-year low

The Hang Seng Index fell 432 points, or 1.8%, to 23,336, its lowest close in a year, as a broad selloff in technology shares deepened.

"The combination of contracting consumer spending in China and a tech-sector rout has created a perfect storm for Hong Kong-listed equities," said Gary Ng, senior economist at Natixis. "The divergence with onshore A-shares shows capital is rotating away from offshore Chinese stocks."

The Hang Seng China Enterprises Index closed at 7,759, down 155 points, or 2%, representing a cumulative decline of about 20% from its October 2025 peak of 9,770 — the textbook definition of a bear market. The Hang Seng Tech Index tumbled 3.3% to 4,399. Turnover reached HKD 334.4 billion. The selloff tracked a 10% plunge in South Korea's market, which traders described as a stock market crash, and came after May retail sales in China contracted for the first time since the pandemic, according to Bloomberg data.

The HSCEI now ranks as the second-worst performer among more than 90 global indexes tracked year-to-date, according to Bloomberg data. The divergence with mainland China is stark: the CSI 300 Index closed up 2.4% on June 22, reaching its highest level since December 2021, as onshore investors rotated into domestic names while offshore Chinese stocks bore the brunt of foreign selling.

Tencent Holdings (0700.HK) hit a more than one-year low, closing at HKD 414.8, down 4.2%, while Alibaba Group (9988.HK) lost its red-chip status and fell 3.8% to HKD 98.95. Meituan (3690.HK) dropped 3.3%, Baidu (9888.HK) slid 3.7%, and Xiaomi Corp. (1810.HK) declined for a fifth consecutive day, falling 4.6% to HKD 22.62. MiniMax-W (0100.HK) plunged 16.5% ahead of its first post-listing lock-up expiry, while TransThera-B (2617.HK) cratered 59.7% to HKD 11.25, a record low since listing, with turnover surging to HKD 596 million.

Short-selling volumes were elevated across the board. Xiaomi's short-selling ratio reached 22.7%, Meituan's hit 20.4%, and Alibaba's stood at 10.8%. The elevated short interest suggests institutional investors are betting on further downside in Hong Kong tech names.

Non-ferrous metals and resource stocks saw the steepest declines among blue chips. CMOC Group (3993.HK) closed at HKD 17.29, down 10.9%, making it the worst-performing blue chip of the day. Zijin Mining (2899.HK) fell 6.5%, Aluminum Corp. of China (2600.HK) dropped 6.4%, and China Hongqiao Group (1378.HK) declined 3.2%.

Defensive and financial names provided a limited buffer. Geely Auto (0175.HK) was the best-performing blue chip, rising 2.1% to HKD 17.82. Power Assets (0006.HK) gained 1.6%, and HSBC Holdings (0005.HK) rose 0.5% to HKD 148.7 after hitting an intraday record high of HKD 150.5.

The selloff in Hong Kong comes as China's economic recovery shows signs of stalling. Domestic travel during the Dragon Boat Festival holiday came in flat year-over-year, and the contraction in May retail sales — the first since the pandemic — has raised concerns that consumer spending, a key pillar of the recovery, is losing momentum. The MSCI China Index also flirted with bear market territory, briefly dipping more than 20% below its October high before recovering slightly.

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