Michael Burry is pointing traders toward Hong Kong’s badly lagging stock market, arguing that the sharp gap between the city’s equities and higher-flying markets in South Korea, Japan and global semiconductor shares has created a rare chance to look for undervalued companies.
Burry, the founder of Scion Asset Management and one of the best-known figures to have anticipated the 2008 U.S. mortgage crisis, said on July 17 that Hong Kong-listed stocks now stand out after months of weak performance. His view rests on a simple market rotation idea: capital that crowded into Korean shares, Japanese equities and AI-linked semiconductor names may begin looking for cheaper opportunities as enthusiasm around chip stocks cools.
That argument comes as global markets show a striking performance divide. The Hang Seng Index is down about 7% this year, while the Hang Seng Tech Index has fallen 15.22%. By comparison, South Korea’s main stock index has surged 62%, Japan’s Nikkei 225 has gained 26%, and the U.S.-listed SOXX ETF, which tracks major semiconductor shares, has climbed 76%.
The gap has become difficult for global traders to ignore. Hong Kong has missed much of the rally that lifted other Asian markets and technology-heavy indexes, even though the city remains a major listing hub and has seen rising activity from artificial intelligence-related companies. For contrarian traders, the question is whether the weak headline indexes reflect deep problems or whether they have simply failed to capture pockets of growth already forming beneath the surface.
Burry’s remarks also arrive at a moment when traders across asset classes are reassessing exposure to expensive technology trades. The AI boom has lifted chipmakers, data center suppliers and related stocks at a pace that has left some market participants wary of stretched valuations. If that trade loses momentum, cheaper markets could become more attractive, particularly those that have already endured prolonged selling.
Hong Kong is one of the clearest examples of that divide.
Burry shifts toward cheaper growth names
Burry’s portfolio moves appear consistent with his public comments. Scion Asset Management has increased its holding in JD.com, the Chinese e-commerce company, while also building new positions in DraftKings and Flutter, two major names in the sports betting and online gaming industry.
The increase in JD.com is particularly notable because Chinese consumer and e-commerce names have faced persistent pressure. Traders have worried about weak household demand, uneven retail spending and fragile confidence in China’s post-pandemic recovery. Those concerns have weighed heavily on Hong Kong-listed Chinese technology and internet companies, many of which are major components of the Hang Seng Tech Index.
For Burry, however, that weakness may be part of the attraction. His career has been built around identifying assets he believes are mispriced before the wider market changes its mind. His latest stance does not suggest Hong Kong stocks are free of risk. Rather, it suggests that prices may already reflect a heavy dose of bad news.
JD.com illustrates the tension in the market. The company operates in a sector tied closely to Chinese consumer spending, which remains under scrutiny. At the same time, it is a large, established business trading in a market that has been heavily discounted compared with faster-rising global peers.
That kind of setup is often where value-focused traders begin searching.
Hong Kong’s weakness contrasts with global strength
The underperformance of Hong Kong’s main benchmarks has been severe. The Hang Seng Index’s 7% decline this year looks modest only when compared with the sharper drop in the Hang Seng Tech Index. A 15.22% fall in the tech benchmark stands in sharp contrast to the powerful rallies seen in markets tied to semiconductors, AI infrastructure and corporate reform themes.
South Korea’s 62% rise has been helped by enthusiasm around technology, memory chips and corporate governance changes. Japan’s Nikkei 225 has benefited from foreign capital inflows, a weaker yen at key moments, stronger corporate returns and renewed interest in Japanese equities after decades of underperformance. Semiconductor-linked shares, meanwhile, have become the center of the global AI trade, helping the SOXX ETF rise 76%.
Hong Kong has not shared in that momentum. The city continues to face the drag of China’s slower consumption recovery, caution toward Chinese private companies and lingering concerns about regulation, property weakness and household confidence.
Yet the same weakness has also made valuations appear cheaper. That is the core of Burry’s argument: capital may eventually rotate away from markets where expectations are already high and toward markets where expectations are low.
This does not mean a rebound is guaranteed. Cheap assets can remain cheap for long periods if earnings disappoint or if confidence continues to erode. But the scale of the difference between Hong Kong and other global markets has created a clearer case for renewed attention.
AI activity has not fully reached the indexes
One reason Hong Kong’s market picture may be more complex than the headline indexes suggest is the rise of AI-linked business activity in the city’s capital markets.
At a recent industry briefing, Wang Yajun, Goldman Sachs Asia’s head of equity capital markets, said Hong Kong’s financial market has already entered what he described as an “AI era.” His point was that trading activity and new public offerings are increasingly being shaped by artificial intelligence companies, even though the structure of major indexes has not yet caught up.
Wang said newer AI enterprises have become important in trading volume and listing activity, but index inclusion usually happens more slowly. A company may attract strong market demand before it becomes part of a major benchmark. As a result, the city’s headline indexes may not fully reflect where capital is already moving.
That matters because many traders judge Hong Kong by the performance of the Hang Seng Index or Hang Seng Tech Index. If those benchmarks are still weighted toward companies facing older problems, such as consumer weakness or regulatory overhang, they may miss early growth in newer sectors.
Goldman Sachs has projected that Hong Kong’s total equity financing in 2024 could exceed the record level reached in 2021, supported by a pipeline of AI companies preparing to list in the second half of the year. The bank expects continued spending on AI infrastructure to support related capital expenditure.
That outlook adds another layer to Burry’s argument. Hong Kong may look weak at the index level, but parts of the market linked to AI, infrastructure and new listings may be more active than the headline numbers imply.
China consumption remains the main risk
The biggest challenge for Hong Kong equities remains China’s consumer backdrop. Weak retail sentiment and cautious household spending have weighed on companies tied to e-commerce, travel, discretionary goods and online services.
Chinese households have remained careful with spending amid property market stress, slower income growth and a more uncertain employment outlook. That has hurt confidence in internet platforms and consumer-facing companies, which once commanded much higher valuations.
The e-commerce sector is a key pressure point. Companies such as JD.com and other major platforms operate in an intensely competitive market, where discounts, logistics costs and slower demand can squeeze margins. Even if valuations look low, traders still need evidence that earnings can stabilize.
Morgan Stanley has maintained a positive stance on Hong Kong equities, citing expectations for improved corporate profitability and limited impact from the expiration of share lock-ups. However, the broader market still faces uncertainty from China’s uneven recovery and retail spending patterns.
That split captures the current debate. The optimistic view is that expectations have become too low and that corporate earnings can recover. The cautious view is that Hong Kong’s discount exists for a reason and may persist until China’s consumption data improves more convincingly.
For now, both views are present in the market.
Rotation away from crowded trades could reshape flows
The possible move toward cheaper Asian shares also reflects a broader reassessment of crowded global trades. Large pools of capital have spent much of the year chasing AI-linked technology companies, especially semiconductor names. As prices rose, those positions became more expensive and more sensitive to any disappointment.
When a popular trade begins to slow, traders often look for areas that have lagged. That does not always mean they abandon technology entirely. Instead, they may reduce exposure to expensive winners and add to markets where valuations are lower and expectations are less demanding.
Hong Kong fits that description. It is liquid, globally accessible and deeply connected to China’s economy. It also contains large technology, consumer, financial and property-linked companies that have already been marked down.
Still, any rotation would need confirmation. A few strong sessions or temporary inflows would not be enough to prove a durable recovery. Traders would likely look for improving earnings, stronger consumption data, more successful listings and signs that global funds are returning to Chinese and Hong Kong assets after a long period of caution.
The key point is that Hong Kong’s weakness has now become part of its appeal. The market no longer needs to match the growth expectations built into AI chip stocks. It only needs to show that conditions are becoming less bad.
Crypto markets feel the liquidity squeeze
The same shift in global liquidity is being felt beyond equities. Bitcoin recently fell below $63,000 as rising government bond yields and reduced appetite for risk assets pressured the market. It was trading near $62,700, showing limited momentum for a sharp near-term rebound.
Higher bond yields can hurt speculative assets because they raise the appeal of lower-risk income and make traders less willing to pay high prices for assets that do not produce cash flow. This dynamic has affected technology stocks at times and can also weigh on cryptocurrency markets, especially when leveraged positions are crowded.
Derivative positioning has added to the pressure. Options contracts worth about $1.2 billion were due to expire on July 17, creating a heavy layer of market exposure around key price levels. Large expirations can keep prices pinned within a narrow range as traders hedge positions and market makers adjust exposure.
That does not mean Bitcoin must fall further. But it does suggest that short-term price action may remain choppy, especially if bond yields keep rising or if traders continue reducing leveraged bets.
The broader message is that liquidity is becoming more selective. When capital is abundant, many assets can rise together. When capital becomes scarcer, money tends to concentrate in fewer areas, and weaker or more crowded trades can suffer quickly.
Ethereum funds show selective demand
Not all digital assets are being treated the same way. Spot Ethereum funds attracted about $96 million during the first three days of the week, showing that demand still exists for specific crypto products even as the wider market struggles.
That demand helped push Ether toward the $1,900 level. The move suggests that some large buyers are not leaving the digital asset market entirely. Instead, they are becoming more selective about where they allocate capital.
Ethereum has a different profile from Bitcoin because of its role in decentralized applications, tokenization, stablecoins and staking. Traders looking for assets with network-based yield may see Ethereum-linked products as more attractive during periods of uncertain price action.
However, selectivity cuts both ways. If capital is becoming more disciplined, assets without clear use cases, strong liquidity or durable demand may find it harder to recover. The market is no longer rewarding everything equally.
For crypto traders, the current environment calls for caution. Chasing sudden price spikes can be dangerous when liquidity is thin and derivatives are heavily positioned. Stop-loss discipline, position sizing and attention to regulated fund flows have become more important as markets react quickly to changes in yields and risk appetite.
Cash and patience regain value
Across stocks and crypto, the strongest theme is not simply that money is leaving one market and entering another. It is that traders are becoming more selective. Expensive AI-linked trades, beaten-down Hong Kong shares, Bitcoin, Ethereum and consumer technology companies are all being judged against a tighter liquidity backdrop.
That makes cash more valuable. Holding cash gives traders flexibility to buy assets at lower prices if forced selling accelerates. It also reduces the need to exit positions under pressure when markets become volatile.
In Hong Kong, the opportunity Burry describes depends on whether weaker prices have created genuine value. The answer will likely vary by company and sector. Some stocks may be cheap because the market has become too pessimistic. Others may be cheap because earnings risks remain real.
The same logic applies to crypto. Ethereum fund inflows show that demand can still appear in targeted areas, while Bitcoin’s weakness near $63,000 shows that major assets remain sensitive to bond yields, leverage and broader liquidity conditions.
For now, Hong Kong’s market is drawing renewed attention because it has been left behind. Burry’s view gives that argument a high-profile voice, but the market will need more than reputation to confirm a turn. Traders will be watching whether AI listings, stronger corporate profits and improved Chinese consumption can narrow the gap between Hong Kong and the global markets that have raced ahead.
Spot shifting capital trends like Burry? Analyze real-time global market flows with Toobit’s markets opportunity dashboard.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
