Author: Zhao Ying

The long and short game, represented by Michael Burry, is unfolding in the Hong Kong stock market, with growing bullish voices.

Michael Burry, the investor who gained fame for accurately predicting the 2008 U.S. subprime mortgage crisis and was a character in the film "The Big Short," recently publicly stated that now is a "great time" to look for cheap stocks in the Hong Kong stock market. His bullish logic is based on the prediction that the global AI chip stock boom is cooling, believing that funds will flow out of South Korea, Japan, and the semiconductor sector, turning to seek valuation lows.

Meanwhile, Wang Yajun, head of Asian equity capital markets at Goldman Sachs, pointed out that the Hong Kong market has effectively entered the AI era, although the main indices have yet to reflect this reality.

Both perspectives point to the same conclusion from different dimensions: there is a significant divergence between the current sluggish performance of Hong Kong stocks and the real vitality within the market; this divergence itself may constitute an investment opportunity. For investors seeking valuation lows, the attractiveness of Hong Kong stocks is rising.

Burry Bullish on Hong Kong Stocks: Valuation Lows After the Cooling of the AI Boom

Michael Burry, founder of Scion Asset Management, stated on July 17 on the X platform, "Now is a great time to look for cheap stocks in the Hong Kong stock market, which should perform well after the luster fades from Korea, Japan, and SOXX (semiconductor ETF)."

Burry's statement has its market background. Global chip stocks have recently faced massive sell-offs, with rising concerns over whether AI companies can convert technical investments into actual profits, combined with high capital expenditure pressures, putting pressure on the previously leading semiconductor sector. In contrast, the decline of Hong Kong stocks this year makes their valuation relatively more attractive.

It is noteworthy that Burry took action earlier this month—according to Bloomberg reports, he increased his stake in Chinese e-commerce company JD.com and established positions in DraftKings and Flutter, showing that his bullish stance on Hong Kong stocks and related Chinese concept stocks is not merely verbal.

Hong Kong Stocks Lag Behind Major Global Markets This Year

From a data perspective, the relative weakness of Hong Kong stocks is clear. The Hang Seng Index has dropped about 7% this year, and the Hang Seng Tech Index has fallen even deeper by 15.22%, mainly dragged down by weak consumer spending and insufficient confidence in the outlook for the Chinese e-commerce industry.

This stands in stark contrast to the strong performance of other major global markets. According to Bloomberg data, the benchmark index in South Korea has surged 62% this year, benefiting from the strong performance of two major chip giants; Japan's Nikkei 225 index has risen 26%; and the iShares SOXX ETF, which tracks the semiconductor sector, has soared 76%.

It is this significant underperformance that leads Burry to believe that Hong Kong stocks meet the criteria for "bargain hunting"—when global funds begin to reassess the sustainability of the AI boom, the previously neglected Hong Kong stocks may welcome an opportunity for a rebound.

Goldman Sachs: Index Distortion, Hong Kong Stocks Have Entered the AI Era

Goldman Sachs’ perspective provides another dimension of interpretation— the sluggishness in Hong Kong stocks is, to some extent, a "false impression" caused by the structural lag of the index.

Wang Yajun, head of Asian (excluding Japan) equity capital markets at Goldman Sachs, bluntly stated at a recent media conference, the Hong Kong market has already entered the AI era, but the main stock indices have not yet managed to reflect this reality; this is the fundamental reason for the "ice and fire" situation of a hot IPO market against a sluggish index performance.

Wang Yajun pointed out that the hottest topic in the Hong Kong stock market this year is AI, with the most actively traded, best-performing, and highest financing amounts all being AI-related stocks. However, the adjustment of index constituents takes a long time, leading to a mismatch between the index and the real face of the market. He expects that the total equity financing in the Hong Kong market this year is likely to reach a historical high, with annual IPO financing expected to surpass the historical peak in 2021, and more AI companies will go public in Hong Kong in the second half of the year.

On the fundamentals, Wang Yajun believes that supported by growth in end-user demand, AI companies will continue to invest in capital expenditure, providing a foundation for the long-term performance of related sectors.

Many Bullish Voices Gather, Discrepancies Remain

Burry is not fighting alone. According to Bloomberg, Morgan Stanley has also recently urged investors to buy Hong Kong stocks, citing optimistic expectations for corporate profit prospects and believing that the impact of lock-up expiry will be relatively limited.

However, the logic of being bullish on Hong Kong stocks does not come without challenges. The decline of the Hang Seng Index this year reflects the market's continued concerns over the pace of recovery in Chinese consumption and the profitability of the e-commerce industry; these structural pressures are unlikely to completely dissipate in the short term. The "mismatch between the index and the market" described by Goldman Sachs' Wang Yajun also means that if ordinary investors rely solely on the index as a reference, they may underestimate the structural opportunities within Hong Kong stocks while also ignoring the pressures still facing traditional heavyweight stocks.

For investors, Burry’s bargain-hunting signal and Goldman Sachs’ AI narrative jointly outline a picture of opportunity in Hong Kong stocks, but how to accurately position between overall index pressure and structural highlights remains the core question facing the market.