Major Hong Kong stock indices showed strong collective performance today. A concentrated surge in geopolitical risk-off sentiment drove oil prices sharply higher, with oil and gas ETFs leading the gains. Meanwhile, overseas licensing data for Chinese innovative drugs continued to exceed expectations, leading to a broad recovery in the biotech sector. At the close, the Hang Seng Index rose 2.36% to 25,143.05 points, with a total turnover of HK$306.413 billion. The Hang Seng Tech Index gained 2.79% to 4,752.15 points.
Among the largest Hong Kong ETFs by size, the Tracker Fund of Hong Kong (02800) closed up 2.4% at HK$25.58. The CSOP Hang Seng TECH Index Daily (2x) Leveraged Product (07709) surged 17.37% to HK$52.58. The iShares Core Hang Seng China Enterprises ETF (02828) rose 2.77% to HK$86.02.
Sector Performance Overview
Energy Sector Surge
A sharp rise in geopolitical risk-off sentiment propelled oil prices significantly, with the energy sector leading the market higher and oil & gas ETFs topping the gainers list. At the close, the Fullgoal S&P Oil & Gas Exploration & Production Select Industry ETF (513350.SH) surged 7.15% to CNY 1.289. The Harvest S&P Oil & Gas Exploration & Production Select Industry ETF (159518.SZ) gained 6.67% to CNY 1.20. The ChinaAMC CSI Energy Index ETF (159930.SZ) advanced 6.18% to CNY 1.666.
Persistent geopolitical risks, including escalating U.S.-Iran military tensions and the potential blockade of the Strait of Hormuz, have fueled market concerns over disruptions to crude oil exports and transportation, driving international oil prices sharply higher. Brent crude has broken through the $90 per barrel mark.
Analysis suggests the oil market may already be repricing trade disruption risks. With the U.S.-Iran situation escalating over the weekend, a prolonged Strait closure could necessitate a further assessment of extreme inventory risks. Compared to the initial closure during the early stages of the U.S.-Iran conflict in late February, the market landscape may have shifted fundamentally. Global oil inventories have been drawn down for months, significantly reducing buffer capacity. Coupled with Strategic Petroleum Reserve releases in OECD nations nearing their end, destocking pressure may increasingly shift to commercial inventories, potentially leading to higher short-term elasticity in crude risk premiums.
Further analysis indicates that during previous Strait closures, some oil wells were forced to shut down. Prolonged shutdowns could lead to permanent loss of some production capacity. Long-term, against a backdrop of low capital expenditure, U.S. inventory wells and new drilling counts have repeatedly hit new lows, suggesting that high U.S. crude output may be unsustainable. Future spare supply and pricing power are likely to be held by the Middle East. However, the probability of conflict during the trough of a Kondratieff wave depression is increasing, and real-world contradictions are becoming more pronounced, systematically elevating the risk premium for energy assets.
Biotech Sector Recovery
China's innovative drug out-licensing transaction value hit a new record high, with overseas data consistently surpassing expectations, leading to a collective rebound in biotech ETFs. At the close, the Huatai-PineBridge CSI Hong Kong Innovative Drug Index ETF (520500.SH) rose 4.74% to CNY 1.415. The ICBC Credit Suisse CSI Hong Kong Stock Connect Innovative Drug Index ETF (159217.SZ) gained 4.57% to CNY 1.167. The Fullgoal CSI Hong Kong Stock Connect Innovative Drug & Medical ETF (159506.SH) increased 4.53% to CNY 1.223.
China's innovative drug out-licensing transaction value reached a new peak in the first half of 2026, with total License-out deal value estimated between $99.7 billion and $110 billion, already exceeding the full-year 2024 level. The inclusion of innovative drugs in the National Reimbursement Drug List for the first time, combined with supportive policies and strong overseas data, is driving the sector higher.
Analysts note that although the innovative drug and related industry chain sectors experienced a significant correction with the broader market last Friday, the view remains that the bottom for the innovative drug and industry chain reversal trend is established and unchanged. A potential rally driven by a confluence of earnings and clinical data could emerge in August-September, with dips offering buying opportunities. As the half-year earnings reporting season begins, key innovative drugs have shown sales growth in the first half mostly meeting or exceeding expectations, suggesting the sector could rise further during the earnings period. Additionally, from August onwards, major medical conferences such as WCLC and ESMO will begin, where clinical data for domestic new drugs will become more mature, potentially catalyzing a sector rally driven by both earnings and clinical data.
Market Outlook and Strategy
Analysts commented that over the past week, deleveraging in South Korea triggered a global tech stock adjustment, with A-share computing power stocks seeing significant corrections. The core market concern lies in the depth and duration of this adjustment. This round of冲击 appears to be driven primarily by risk sentiment transmission rather than a liquidity shock. South Korea's main risk stems from triple-leverage nesting, a structure not present domestically. This is coupled with a domestic environment of accommodative macro liquidity and declining bond yields, as well as the approaching late-July Politburo meeting and rising expectations for consumption-boosting policies. A comprehensive judgment suggests the market does not have the conditions to enter a bear market directly, and adjustments provide a window for bargain-hunting. For allocation, short-term focus is on innovative drugs and high-dividend stocks, while adding to upstream computing power positions may be prudent after South Korean leverage is unwound.
ETF Market Activity
The Dacheng CSI All Share Electric Power & Utilities Index ETF (159059.SZ) debuted today, closing up 3.86% at CNY 1.049 with a turnover of CNY 125 million. The fund tracks the CSI All Share Electric Power & Utilities Index, focusing on utilities sectors like electricity and heat production and supply.
The Yongwin CNI Value 100 Index ETF (159085.SZ) also debuted today, closing up 2.01% at CNY 1.015 with a turnover of CNY 134 million. The fund tracks the CNI Value 100 Index, primarily holding value-style stocks such as banks and telecommunications.
Comments