Tencent, Xiaomi shares fall as Chinese investors sell off

In June, Chinese investors sold significant stakes in major Hong Kong technology firms.

The selloff included shares valued at HK$46.4 billion (US$5.9 billion) in Tencent Holdings, Xiaomi Corp., and Alibaba Group.

This represents the second consecutive month of net selling by mainland investors through trading links with Hong Kong.

Tencent experienced the largest outflow at HK$21.4 billion (US$2.73 billion), followed by Xiaomi at HK$15.7 billion (US $2 billion) and Alibaba at HK$9.2 billion (US $1.17 billion).

The sales occur as China’s tech sector faces increasing competition in ecommerce, and earlier gains have stalled.

Tencent and Alibaba shares have shown limited movement since April, while Xiaomi’s stock rose after launching a new car.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ The DeepSeek catalyst: China’s AI revolution reshaping tech investment patterns

The recent selling of major tech stocks by mainland investors comes against the backdrop of China’s significant AI advancements, which had initially driven a tech rally.

DeepSeek’s R1 AI model launch catalyzed substantial growth in Chinese tech stocks, with the Hang Seng Tech Index surging nearly 30% in early 2025 after years of underperformance1.

This AI breakthrough positioned Chinese companies as increasingly competitive globally, with Alibaba, Tencent, and other tech giants pivoting heavily toward AI infrastructure investments2.

The current selling pattern suggests investors may be rebalancing portfolios following this AI-driven rally, taking profits while assessing how these companies will monetize their AI investments in upcoming earnings reports.

President Xi Jinping’s meetings with tech entrepreneurs marked a critical shift from regulatory crackdowns to innovation support, fundamentally changing the investment landscape for Chinese tech stocks1.

2️⃣ Cyclical investment patterns amid China’s industrial transformation

The current tech stock selling reflects a strategic investment rotation that parallels China’s broader economic shifts toward high-tech manufacturing and self-sufficiency.