Big Short’s Burry: Now is a great time to buy the dip in Hong Kong stocks

Author: Zhao Ying

The long-vs-short game represented by Michael Burry is unfolding in Hong Kong’s stock market, with bullish voices continuing to gather.

Michael Burry, the investor who became widely known for accurately forecasting the 2008 U.S. subprime mortgage crisis and whose story was adapted into the movie The Big Short, recently publicly stated that it is now a “great time” to look for cheap stocks in the Hong Kong market. His bullish logic is based on a view that the global AI chip stock frenzy is cooling off, and that capital will move out of South Korea, Japan, and the semiconductor sector, then seek valuation bargains.

Meanwhile, Wang Yajun, Head of Equities Capital Markets at Goldman Sachs Asia, also pointed out that the Hong Kong market has effectively entered the AI era, but the major indices have not yet reflected this reality.

The two viewpoints, from different angles, point to the same conclusion: there is a significant disconnect between Hong Kong stocks’ current lackluster performance and the market’s actual underlying vitality, and this disconnect itself may be creating an investment opportunity. For investors looking for valuation bargains, Hong Kong stocks’ appeal is rising.

Burry is bullish on Hong Kong stocks: valuation bargains after the AI boom cools

On July 17, Scion Asset Management founder Michael Burry posted on X, saying, “Now is a great time to look for cheap Hong Kong stocks—these stocks should perform well after the glow fades from South Korea, Japan, and SOXX (semiconductor ETF).”

Burry’s comments have market context. Global chip stocks have recently faced large-scale selloffs, and doubts have been intensifying about whether AI companies can turn technology spending into actual profits. Combined with the pressure from high capital expenditures, the semiconductor sector—once leading globally—has been weighed down. By contrast, Hong Kong stocks’ decline since the start of this year has made their valuations relatively more attractive.

Notably, earlier this month Burry already took action—according to Bloomberg, he increased his holdings in Chinese e-commerce company JD.com, and also established new positions in DraftKings and Flutter, showing that his bullish stance on Hong Kong stocks and related China concept stocks is not just talk.

Hong Kong stocks have significantly underperformed major global markets this year

At the data level, Hong Kong stocks’ relative weakness is obvious. The Hang Seng Index is down about 7% year-to-date, while the Hang Seng Tech Index has fallen even more, by 15.22%. Key drag factors include weak consumer spending and insufficient confidence in the outlook for China’s e-commerce industry.

This sharply contrasts with the strong performance of other major global markets. According to Bloomberg data, South Korea’s benchmark index has surged 62% year-to-date, boosted by the strong performance of two major chip giants; Japan’s Nikkei 225 is up 26%; and the iShares SOXX ETF tracking the semiconductor sector has jumped 76%.

It is precisely this kind of broad underperformance that leads Burry to believe Hong Kong stocks have the conditions to “pick up bargains”—when global capital begins to reassess the sustainability of the AI boom, previously overlooked Hong Kong stocks may be in line for a catch-up rally.

Goldman: index distortion—Hong Kong stocks have entered the AI era

Goldman’s perspective offers another interpretation: the dull performance of Hong Kong stocks, to some extent, is an “illusion” caused by structural lag in index composition.

Wang Yajun, Head of Equities Capital Markets at Goldman Sachs Asia (excluding Japan), said directly at a recent media briefing that Hong Kong’s market has entered the AI era, but the major stock indices have not yet been able to reflect this reality. This is the fundamental reason behind the “icy-hot” contrast between the IPO market’s heat and the weakness in index performance.

Wang Yajun noted that this year the most active topic in Hong Kong’s stock market is AI, and the most actively traded, best-performing, and largest financing volumes are all AI-related stocks. However, index constituent adjustments take a long time, leading to a mismatch between the index and the market’s real picture. He expects total equity financing in Hong Kong’s market this year to set a record high, with full-year IPO financing expected to exceed the historical peak of 2021, and that more AI companies will list in Hong Kong in the second half of the year.

On fundamental assessment, Wang Yajun believes that supported by growth in end-demand, AI companies’ capital expenditures will continue, providing a basis for the long-term performance of related sectors.

Bullish voices are converging, but disagreements remain

Burry is not alone. According to Bloomberg, Morgan Stanley has also recently urged investors to buy Hong Kong stocks. One of the reasons cited is optimistic expectations for corporate earnings, and it believes the impact from the unlocking of restricted shares will be relatively limited.

However, the logic for being bullish on Hong Kong stocks also faces challenges. The decline in the Hang Seng Index this year reflects ongoing concerns in the market about the pace of China’s consumer recovery and the profitability of the e-commerce sector—these structural pressures may be difficult to fully fade in the near term. The “index-market mismatch” described by Goldman’s Wang Yajun also implies that if ordinary investors rely only on indices as a reference, they may both underestimate the structural opportunities within Hong Kong stocks and overlook the pressure still facing traditional weighted stocks.

For investors, Burry’s bottom-fishing signal and Goldman’s AI narrative together outline a picture of opportunities in Hong Kong stocks. But how to position precisely between overall index pressure and structural highlights remains the core question facing the market.