[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.
"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.