Auto stocks extended losses in Hong Kong on Tuesday, with the sector reeling from fears of a potential price war sparked by electric vehicle giant BYD Co’s sweeping discounting.

The sell-off is also seen in the consumer tech sector, where companies with food delivery operations are ramping up their subsidy strategies to capture market share.

Despite the drag from auto stocks, the benchmark Hang Seng Index told a tale of mixed fortunes. A reported initiative by the city’s stock exchange operator helped the flagship index reverse early losses, closing up 0.43 percent, or 99.66 points, at 23,381.99, on Tuesday.

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The Hang Seng Tech Index, which tracks 30 major technology firms, rose 0.48 percent, while the Hang Seng China Enterprises Index, representing Chinese mainland companies listed in Hong Kong, added 0.38 percent.

Dongfeng Motor Corp led the sector loss with a 3.5-percent drop, followed by Nio Inc with an over 2-percent decrease. Geely Auto, BYD Co, and Brilliance Auto each fell more than 1.5 percent. The declines came on the heels of Monday’s plunge, when BYD and Geely tumbled around 9 percent — their steepest one-day declines in about a month — after BYD announced price cuts of up to 34 percent.

“Given today’s losses, the market may need more time to digest these concerns on (a potential) price war,” said Kenny Ng, a strategist at Everbright Securities International.

Alvin Ngan, an equity strategist at Zhongtai Financial International, said such large-scale discounts may boost revenues in the short term, but they risk eroding profitability. Investors might remain cautious and stay on the sidelines until the outlook for the sector stabilizes, he added.

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A similar pattern exists in the food delivery sector. Alibaba’s Ele.me and newcomer JD.com have ramped up competition with heavy subsidies to gain market share. Meituan founder Wang Xing said during a Monday earnings call that the company will “spare no expense” in defending its market leadership.

“Every internet player is prepared to invest heavily in this competition,” Wang said. “This suggests that there will be huge value for the ultimate winner, and Meituan is determined to be that winner.”

However, analysts cautioned that escalating competition could hurt short-term profitability and reduce free cash flow. This will weigh on stock prices for companies at the center of the competition, likely causing them to underperform compared to the broader tech sector over the long term, they added.

Alibaba shares edged up 0.94 percent on Tuesday, Meituan rose 2.09 percent, and JD.com fell 1.0 percent.

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Hong Kong Exchanges and Clearing Ltd jumped 2.84 percent after reports that the bourse operator plans to introduce “zero-days to expiry” (0DTE) options for the Hang Seng Index by the first half of 2026. Already popular in the United States, the instrument that expires within a day is expected to enhance Hong Kong’s derivatives market.

The 0DTE options offer high flexibility and low transaction costs, which are attractive to quantitative funds and short-term traders, said Ngan. But he noted that their complexity and rapid price movements demand a higher level of expertise from investors.

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The Hang Seng Index has extended gains from 2024, climbing about 20 percent so far this year. While the market faced headwinds in April after the US announced “reciprocal” tariffs on trade partners, including China, sentiment has been gradually recovering.

Looking ahead, Ng said the index could reach around 25,000 points in the second half of the year, hinging on the mainland’s economic performance and potential progress in Sino-US tariff negotiations.

Contact the writer at irisli@chinadailyhk.com