Investor sentiment in China has weakened sharply, leading to the biggest stock market decline in 2 years. In February 2026, technology shares listed in Hong Kong faced intense selling pressure as investors shifted their focus from rapid expansion to profitability, stable cash flow and long-term financial sustainability. This change in outlook has resulted in heavy selling across several major technology counters.
The Hang Seng Tech Index has dropped nearly 10% this month, marking its steepest monthly fall since January 2024. From its peak in October 2025, the index has declined about 23%, placing it firmly in bear market territory, according to market analysts. The downturn reflects growing caution among investors who are reassessing valuations and growth expectations in the Chinese tech sector.
Weak corporate earnings and rising operational costs have played a major role in the decline. Revenue growth has slowed compared to previous periods, while expenses related to operations and investments continue to rise. This has squeezed profit margins and reduced investor confidence. Although companies have significantly increased investments in artificial intelligence projects, the short-term revenue impact remains limited. Higher spending without immediate returns has added pressure on company finances and weighed on overall market sentiment. Mainland investors, who were earlier active buyers, are now booking profits or selling. In the Hong Kong market, sales worth billions of Hong Kong dollars have been recorded, further weakening momentum.
Major companies have not been spared. Shares of Baidu have fallen more than 19% this month, impacted by weakness in its advertising business and AI segment, along with concerns about quarterly earnings. Investors are closely tracking upcoming financial results from companies such as JD.com and Bilibili, as their performance could influence the sector’s direction. Broader Asian markets have remained relatively stable, suggesting that the weakness is largely confined to Chinese technology stocks. Analysts say cash flow strength and profitability will be critical going forward. If earnings growth does not improve and competition intensifies, volatility in Chinese tech shares may continue, with global investors watching closely.
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