Advanced Packaging in China Poised for Breakout Year? Largest HK Connect Tech ETF Hua Bao Falls Over 2.6% in Consecutive Sessions

On May 15th, Hong Kong's hard tech sector experienced another pullback. The largest and most liquid* Hong Kong Connect Information Technology ETF Hua Bao Hua Bao (159131) saw its on-exchange price drop by 2.66%, marking a second consecutive day of decline, with a real-time turnover of 750 million yuan.

Analysis suggests that SK Hynix's better-than-expected results were driven by the explosive demand for AI computing power, leading to a surge in HBM and DRAM prices (ASP up ~60% QoQ), SK Hynix's dominant market position, and its near 60% share of the HBM market in Q1 2026, along with its supply ties to NVIDIA for HBM3/3E/4. It is recommended to focus on (1) Testing Equipment: Watch for breakthroughs in domestic memory and SoC testers driven by AI chips; (2) Packaging Equipment: Domestic AI chips are adopting advanced packaging like CoWoS and HBM. China holds strong global competitiveness in the packaging and testing segment, and the domestic advanced packaging sector is potentially entering a significant growth phase this year, presenting new opportunities for local packaging equipment suppliers.

Further analysis points to a surge in AI memory demand, signaling the entry of memory chips into a super cycle. Prices for all categories of memory chips continue to soar, with DRAM contract prices for Q1 rising 80%–90% quarter-over-quarter, and a further 58%–63% increase forecast for Q2. Spot prices for some specifications have risen nearly tenfold this year. For the tech sector, it is advised to build positions in semiconductor equipment and leading memory chip companies in phases. Previously popular AI concept stocks have seen significant corrections, and short-term pressure for further pullbacks remains. New model releases are anticipated in May. Focus is recommended on memory chips (with DRAM/NAND prices continuing to surge) and the HBM supply chain.

Since rebounding from its low on March 31st, the underlying index of the Hong Kong Connect Information Technology ETF Hua Bao (159131) – the CSI Hong Kong Connect IT Composite Index – has gained 28.04% cumulatively. Over the same period, the Hang Seng Tech Index and the Hong Kong Connect Tech Index rose by 8.23% and 6.43% respectively, demonstrating significantly sharper performance and greater elasticity.

The Hong Kong Connect Information Technology ETF Hua Bao (159131) supports T+0 trading and directly targets the Hong Kong stock chip super cycle. It is the first ETF in the market to track the CSI Hong Kong Connect IT Composite Index and is the largest and most liquid fund of its kind. Its feeder fund code is 026755. The underlying index is composed of "70% hardware + 30% software," heavily weighted towards Hong Kong-listed "semiconductor + electronics + computer software" stocks. It covers 52 Hong Kong hard tech companies, including SMIC with a weight of 14.21%, Xiaomi Group with 10.31%, Lenovo Group with 9.33%, and Huahong Semiconductor with 8.82%. The index excludes large-cap internet companies like Alibaba, Tencent, and Meituan, offering higher concentration and greater potential to capture trends in Hong Kong's AI hard tech sector.

*Institutional viewpoints referenced. Risk Warning: The Hong Kong Connect Information Technology ETF Hua Bao and its feeder fund passively track the CSI Hong Kong Connect IT Composite Index. The index's base date is November 14, 2014, and it was launched on June 23, 2017. The index constituents mentioned in this material are for illustrative purposes only; descriptions of individual stocks do not constitute investment advice in any form, nor do they represent the holdings or trading activities of any fund managed by the fund manager. This product is issued and managed by Hua Bao Fund Management Co., Ltd. Selling agents do not bear responsibility for the product's investment performance, redemption, or risk management. Investors should carefully read the Fund Contract, Prospectus, Fund Product Key Facts Statement, and other legal documents to understand the fund's risk-return characteristics and choose products suitable for their own risk tolerance. Past performance of the fund is not indicative of future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Fund investment involves risks. The fund manager assesses this fund's risk level as R4 (Medium-High Risk), suitable for Aggressive (C4) and above investors. Selling institutions (including the fund manager's direct sales channels and other selling agents) evaluate this fund's risk according to relevant laws and regulations. Investors should pay attention to the appropriateness opinions issued by selling institutions and base their decisions on the matching results. Appropriateness opinions from different selling institutions may not be consistent. The fund product risk rating results issued by fund selling institutions shall not be lower than the risk rating results determined by the fund manager. The description of the fund's risk-return characteristics in the fund contract and its risk rating may differ due to different considerations. Investors should understand the fund's risk-return profile and make their own investment decisions, bearing the associated risks. The China Securities Regulatory Commission's registration of this fund does not indicate its substantive judgment or guarantee of the fund's investment value, market prospects, or returns. Funds carry risks; investment requires caution.