Major Hong Kong stock indices opened and traded higher today before briefly turning negative in the afternoon, with the Hang Seng TECH Index continuing its decline. A disappointing earnings outlook for SK hynix triggered a reassessment of valuations, leading to a collective plunge in South Korea-focused ETFs. Meanwhile, renewed concerns over supply disruptions following another blockade of the Strait of Hormuz pushed oil and gas-related ETFs higher against the market trend. At the close, the Hang Seng Index rose 0.16% to 24,213.72 points, with a full-day turnover of HK$309.515 billion. The Hang Seng TECH Index fell 0.96% to 4,676.43 points.
Among major Hong Kong-listed ETFs by size, Tracker Fund (02800) closed up 0.24% at HK$24.68. CSOP 2x Leveraged SK hynix ETF (07709) closed down 33% at HK$59.9. CSOP Hang Seng TECH Index ETF (03033) closed down 0.95% at HK$4.59.
Market Sector Performance
1. The disappointing earnings outlook for SK hynix prompted a valuation reassessment. Combined with expectations for tighter regulation of single-stock leveraged ETFs and interest rate hike concerns, South Korea-focused ETFs experienced a collective sharp decline. By the close, CSOP 2x Leveraged SK hynix ETF (07709) fell 33% to HK$59.9. CSOP 2x Leveraged Samsung Electronics ETF (07747) dropped 20.09% to HK$89.14. TR Korea ETF (02848) declined 11.09% to HK$1,616.
As of July 13th, South Korea's KOSPI index had plunged nearly 9%. Shares of SK hynix in Seoul closed down over 15%, while Samsung Electronics Co., Ltd. fell more than 10%. The Korea Exchange activated a SIDECAR mechanism to halt programmatic selling on the KOSPI. Local Korean brokerage KIS forecasted SK hynix's Q2 operating profit at 60.4 trillion won. Although this represents a surge of 556% year-on-year, it is still 8% below market consensus estimates. This, coupled with increased profit-taking sentiment following the listing of SK hynix ADRs on Nasdaq last Friday and the fact that Korean financial authorities have begun studying measures to curb volatility in single-stock leveraged ETFs, contributed to the sell-off.
It is worth noting that SK hynix ADRs surged nearly 13% on their Nasdaq debut on July 10th. However, following the realization of this significant positive catalyst, a sharp correction ensued. Phillip Wool, Chief Research Officer at Rayliant Global Advisors, noted that this round of selling "does not truly indicate any waning enthusiasm for AI hardware." He stated it is "primarily due to risk management considerations, as many investors have accumulated substantial long positions following the strong rally in Korean AI chipmakers."
2. Renewed supply disruption fears following another blockade of the Strait of Hormuz led to continued gains in international oil prices, pushing oil and gas ETFs higher against the market trend. At the close, Wells Fargo S&P Oil & Gas ETF (513350.SH) rose 3.96% to 1.181 yuan. Harvest S&P Oil & Gas ETF (159518.SZ) gained 2.34% to 1.093 yuan. F Samsung Crude Oil Futures ETF (03175) increased 3.15% to HK$9.175.
According to reports, on the early morning of July 12th, Iran's Islamic Revolutionary Guard Corps Navy announced the closure of the Strait of Hormuz effective immediately, "until further notice and until the US ceases its interference in the region." The statement said that several hours earlier, a number of vessels attempted to sail along an unapproved route and ignored warnings, with one being hit by warning shots from Iranian forces. The US Central Command subsequently launched a new round of strikes at 17:00 US Eastern Time on July 12th, marking the fourth US strike against Iran within a week.
Zhengxin Futures believes that short-term geopolitical tensions have flared up again with the Strait of Hormuz being blocked once more, and there are signs of military conflict spreading to other countries. If this coincides with peak seasonal demand and emergency stockpiling driven by concerns over the Strait, oil prices may still have room to rebound. However, vigilance against repeated market news fluctuations remains necessary.
Yao Yuan, Senior Investment Strategist for Asia at Amundi Investment Institute, pointed out that significant differences remain between the US and Iran. It is still unknown whether US concessions are merely a temporary truce ahead of the mid-term elections, leaving subsequent negotiations with considerable uncertainty. The key is whether full navigation through the Strait of Hormuz can be guaranteed. The direction of energy prices will influence inflation, thereby continuing to subtly affect the Federal Reserve's policy balance. Yao Yuan specifically mentioned that against the backdrop of Middle East conflicts, insurance costs have surged to 20 times pre-war levels, imposing a substantial constraint on transportation costs and volume.
Institutional Perspectives
A strategy team noted that since mid-to-late June 2026, the volatility of the TMT sector relative to the broader market has significantly amplified, roughly equivalent to the situation after concerns about the US AI bubble intensified in September and October 2025. During that period, significant market divergence emerged, and the main thematic rally began to "cool off" temporarily. The next important observation point will be in mid-to-late July. First, to see whether the performance of SK hynix post-US listing can be stronger than that of SpaceX. Second, major overseas semiconductor manufacturers and CSP giants will successively release their earnings reports. Focus will be on changes in CSP profit margins, performance guidance, and AI CAPEX guidance. Third, a key domestic meeting at the end of July will provide clearer signals.
The team believes that the internal and external environment for Chinese stocks in Q3 2026 has created conditions for a "rebalancing." As the market moves towards diversification, there is potential for a gradual recovery of assets that may have been "unfairly sold off." For instance, attention could be paid to some high-quality blue-chip assets that experienced significant declines due to "panic selling" during the extreme market divergence in mid-to-late June. In terms of overall sector allocation, suggestions include focusing on non-bank financials, innovative drugs, internet, consumer staples, gaming, coal, and lithium batteries. Thematically, suggestions include commercial aerospace and robotics. Meanwhile, from a medium-term perspective, the team remains optimistic about the allocation value of genuine technology leaders within the domestic AI supply chain.
ETF Developments
Penghua Green Power ETF (159067.SZ) debuted today, closing down 1.79% at 0.985 yuan with a turnover of 72.3395 million yuan. The fund closely tracks the CNI Green Power Index, primarily covering listed companies engaged in green power-related businesses.
Comments