Hong Kong's hard technology sector showed a recovery today (July 23rd).
Lenovo Group and Lenovo Holdings, along with Kingboard Laminates Holdings Ltd, all surged more than 6%.
The largest and most liquid Hong Kong Stock Connect Information Technology ETF, Hua Bao (159131), saw its intraday price rise 1.87%, breaking above the 10-day moving average.
Notably, this ETF has recently attracted significant capital inflows, with nearly 5 billion yuan pouring in over the past two days.
On the news front, Alphabet Inc (Google's parent company) disclosed its Q2 earnings on July 22nd local time.
Total revenue for the period reached $119.8 billion, a 24% year-over-year increase, surpassing expectations of $117.02 billion and marking 12 consecutive quarters of double-digit growth.
Operating profit was $40.77 billion, up 30% year-over-year, exceeding the forecast of $40.55 billion, with an operating margin of 34%.
Significantly, Alphabet's capital expenditure for the second quarter soared to $44.92 billion, substantially higher than the market expectation of $44.15 billion, with plans to fully allocate these funds towards AI computing power, data centers, TPU chips, and cloud infrastructure.
During the earnings call, the company announced an upward revision to its full-year capital expenditure guidance to between $195 billion and $205 billion, up from the previous estimate of $180 billion to $190 billion, indicating a significant increase in future investment.
The market has expressed concerns over whether such massive capital expenditures will yield corresponding returns and if they will place substantial pressure on the company's cash flow.
Analysis from Huatai Securities suggests that, despite resilient fundamentals, recent corrections in major global technology hardware indices have sparked discussions on whether the "AI hardware capital expenditure cycle is nearing its peak."
Reviewing historical cycles, the analysis indicates that the current AI computing infrastructure is underpinned by strong growth in token consumption, differing from the 2000 scenario.
Furthermore, the industry's driving force is undergoing a structural transition from "price-driven" to "capacity expansion-driven," which represents a redistribution of profits within the supply chain rather than a reversal of the overall industry logic.
Considering fundamental visibility and the risk-reward ratio, it is recommended to embrace sectors with higher earnings visibility while also monitoring the recovery potential in end-markets.
Hua Bao (159131) is a rare "pure-play" hard technology ETF for the Hong Kong market and supports T+0 trading.
As the first and largest ETF of its kind tracking the Hang Seng Stock Connect Information Technology Composite Index, its underlying index comprises "85% hardware + 15% software," heavily weighted towards Hong Kong-listed "semiconductors + electronics + computer software."
It covers 60 Hong Kong-listed hard tech companies, with the two wafer foundry giants, SMIC and Huahong Grace, together accounting for over 26% of the index weight.
The domestic AI PC leader, Lenovo Group, holds a weight exceeding 10%, while the PCB leaders, Kingboard Holdings and Kingboard Laminates Holdings Ltd, together account for over 11%.
These weightings are the highest among all indices with linked products in the market.
Additionally, on June 15th, the index incorporated several new Hong Kong-listed hard tech players, including Zhipu AI, Shenghong Technology, TianShu, and BiSheng Technology.
The constituent stocks exclude large-cap internet companies like Alibaba, Tencent, and Meituan, resulting in a sharper focus and greater potential to capture the AI hard tech trend in Hong Kong.
Recent market volatility may be significant, and short-term price movements do not predict future performance; fund investments may incur losses.
Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position sizing and risk management.
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