[ET Net News Agency, 03 February 2026] Despite ongoing market concerns about the US
Federal Reserve's outlook, stronger-than-expected US manufacturing data triggered a robust
rebound on Wall Street, leading to a recovery in Asia-Pacific markets. Hong Kong stocks
opened 220 points higher, but selling emerged as the Hang Seng Index (HSI) neared the
27,000 mark. The HSI briefly slipped into negative territory, though support was found
above the 100-day moving average (around 26,265). By midday, the HSI was up 54 points, or
0.2%, at 26,830, with main board turnover close to HKD 195.3 billion. The Hang Seng China
Enterprises Index was down 19 points, or 0.2%, at 9,060, and the Hang Seng Tech Index
dropped 72 points, or 1.3%, to 5,453.

"Kwok Ka Yiu: Policy risk keeps HSI trapped below 28,000 in the short term"

Overnight stability in international markets buoyed both US equities and gold and silver
prices. Asia-Pacific shares followed with a notable rebound this morning. Yet, as the
session progressed, Hong Kong equities gave back much of their early gains, mainly due to
market concerns that the recent hike in value-added tax (VAT) on telecom services in
Mainland China could soon extend into the technology sector. Heavyweight Tencent (00700)
dropped as much as 6%, dragging the HSI into negative territory before recouping some
losses by midday. Kwok Ka Yiu, the Director of Business Development at Harbour Family
Office, told ET Net News Agency that overall external stability is supportive for Hong
Kong stocks but, as the session's selling demonstrated, investors are still digesting the
potential impact of policy changes from the Mainland China. Although the rumour about
extending VAT to the tech sector remains just that, it has already generated significant
market volatility and capped the upside for Hong Kong equities in the near term.
Kwok pointed to the fact that the VAT hike for telecoms, from 6% to 9% and calculated on
gross revenue, not profit, has a sizeable impact on earnings. A similar move in technology
would also deal a significant blow to sector profits. Until these uncertainties are
resolved, a more cautious sentiment is likely to persist. On whether to reduce tech
holdings, Kwok suggested investors consider their current positions. Those with heavy tech
exposure and policy risk concerns could trim positions, but with a swift clarification
from authorities, the sector could bounce back just as quickly. Hence, aggressive or
broad-based selling is not necessary at this point. For the HSI, he said the 28,000 level
has become a ceiling for now. Rising policy risk and higher market caution are keeping the
index within a trading range, with 26,000 as the key support below until more clarity
emerges.

"HSBC rally runs thin on value, telco dividends at risk; Mainland China banks the last
line of defence"

As risk appetite waned, defensive yield plays came back into focus and benefitted from
the external bounce. HSBC (00005) climbed nearly 3% in early trading, reaching a record
high of HKD 139. Kwok noted that while HSBC continues to break new highs, the stock is now
trading at a distinct premium and its dividend yield has fallen below 5%, eroding its
appeal. He described HSBC at these levels as uninspiring, with poor risk-reward, though
not calling a top; he sees the stock as far more attractive if it retraces to the HKD 130
range. BOC Hong Kong (02388) still offers nearly a 5% yield, but Kwok noted the shares
have also rallied to elevated levels.
Previously, telcos had been favoured for yield, but after the VAT rate hike, even though
falling share prices have boosted headline yields, Kwok said profit squeeze expectations
will likely impact 2026 dividends, so he does not advise investors to buy for yield at
current levels. Instead, he recommends investors look to Mainland China banks, where
yields remain around 5%. At current prices, Mainland China banks are a relatively
attractive choice for stable dividend.