Hong Kong's three major indices closed higher on August 21, with the CSI HK Stock Connect Internet Index navigating a turbulent session before finishing in positive territory. The benchmark index initially opened strong but slipped into choppy trading during the morning, only to regain momentum in the afternoon and close with gains.
Internet leaders delivered mixed performances as XIAOMI-W and NetEase both advanced over 4%. Xiaomi's latest-generation humanoid robot, dubbed "Tie Da," made its debut at the 2026 World Robot Conference, while NetEase reported second-quarter revenue growth of 8% to RMB 30.1 billion, surpassing market expectations. Bilibili-W and Kuaishou-W each climbed more than 2%, and TENCENT added over 1%.
Meanwhile, BABA-W fell 2.54% after releasing its earnings, at one point sliding more than 3% during intraday trading. The company published its fiscal first-quarter results for FY2027 on August 20 after market close, covering the quarter ended June 30, 2026. Alibaba Group's revenue rose 9% year-over-year to RMB 268.953 billion, while operating profit declined 57% to RMB 15.161 billion. Capital expenditures surged 75% quarter-over-quarter to RMB 67.7 billion.
Despite the profit dip driven by massive AI-related capital spending, Alibaba Cloud's external commercialization revenue accelerated 45%, marking the fastest growth in 22 quarters. AI-related product revenue achieved triple-digit year-over-year growth for the twelfth consecutive quarter. Alibaba's CEO Eddie Wu emphasized that AI has become the core engine accelerating Alibaba Cloud's growth, projecting that AI-related product annualized recurring revenue (ARR) will approach US$10 billion next quarter. He expressed strong confidence in accelerating toward the target of US$100 billion in annualized cloud external revenue by 2030.
Wu also noted that the return on AI computing capital expenditure is highly certain, with investments expected to be recouped within three years. Given improving gross margins on AI-related products and a rising proportion of self-developed chips, the payback period could potentially shorten to 2.5 years or even 2 years.
With major internet leaders including TENCENT, BABA-W, and XIAOMI-W having now disclosed their latest quarterly results, a common theme has emerged: resilient core businesses combined with accelerated AI commercialization and higher-than-expected AI investment. Across the AI value chain, these internet giants have established deep positions in proprietary large language models, chips, and AI agent applications, positioning themselves as both key participants and primary beneficiaries of AI adoption.
For leading cloud providers, overseas markets have already demonstrated a clear commercialization roadmap. Microsoft Azure, Google Cloud, and Amazon Web Services all continue to post solid growth, with AI demand expanding from frontier model companies to mainstream enterprise clients and office-use scenarios. The positive feedback loop of "capital expenditure - cloud revenue - profit realization - reinvestment" is gradually taking shape, offering a reference framework for domestic cloud providers' revenue growth and margin recovery.
At present, the Hong Kong internet sector remains historically undervalued. The CSI HK Stock Connect Internet Index currently trades at a price-to-earnings ratio (TTM) of just 21.61 times, sitting at the 11.64th percentile of the past decade (as of August 21, 2026). With AI commercialization logic continuing to validate, the foundation for a sector recovery is steadily strengthening.
For investors seeking exposure, the HK Internet ETF Huabao (513770) and its feeder funds (Class A: 017125; Class C: 017126) passively track the CSI HK Stock Connect Internet Index. The fund's top holdings include tech giants such as BABA-W, TENCENT, and XIAOMI-W, along with various AI application companies. Alibaba's current weight stands at 16.92% (as of August 20, 2026), with the top ten holdings collectively accounting for over 80% of the portfolio. The ETF supports same-day T+0 trading and offers strong liquidity.
Investors should note that recent market volatility may be significant, and short-term gains or losses do not predict future performance. Please make investment decisions based on your own financial situation and risk tolerance, with careful attention to position sizing and risk management.
Data sources: Shanghai and Shenzhen stock exchanges, Wind, among others. The stocks mentioned are all top-ten constituent stocks of the CSI HK Stock Connect Internet Index. As of August 20, the weightings for BABA-W, TENCENT, MEITUAN-W, XIAOMI-W, NetEase, Kuaishou-W, and Bilibili-W were 16.92%, 14.49%, 11.61%, 11%, 8.11%, 6.69%, and 2.82%, respectively.
ETF fee disclosure: When subscribing or redeeming fund shares, the subscription/redemption agency may charge a commission of up to 0.5%, which includes fees collected by stock exchanges and registration institutions. Feeder fund fee disclosure: For the Huabao CSI HK Stock Connect Internet ETF Feeder Fund (Class A), the subscription fee rate (front-end) is RMB 1,000 per transaction for amounts above RMB 2 million, 0.6% for amounts between RMB 1 million (inclusive) and RMB 2 million, and 1% for amounts below RMB 1 million. The redemption fee is 1.5% for holdings of less than 7 days and 0% for holdings of 7 days or more. No sales service fee is charged. For the Class C shares, no subscription fee is charged, the redemption fee is 1.5% for holdings of less than 7 days and 0% for holdings of 7 days or more, and the sales service fee is 0.3%.
Risk disclosure: The HK Internet ETF Huabao and its feeder funds passively track the CSI HK Stock Connect Internet Index, which has a base date of December 30, 2016, and was published on January 11, 2021. The index's returns over the past five full calendar years were: 27.02% in 2025, 23.04% in 2024, -24.74% in 2023, -23.01% in 2022, and -36.61% in 2021. The volatility over the same periods was: 33.60% in 2025, 43.49% in 2024, 32.09% in 2023, 49.01% in 2022, and 38.72% in 2021. Index constituent stocks are adjusted periodically according to the index compilation rules, and historical backtested performance does not indicate future index performance. The index constituents mentioned in this article are for illustrative purposes only; stock descriptions do not constitute investment advice in any form and do not represent the holdings or trading activities of any fund managed by the fund manager. The fund manager has assessed this fund's risk level as R4 (medium-high risk), suitable for aggressive (C4) and above investors. Any information appearing in this article (including but not limited to stocks, comments, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors must bear full responsibility for their own investment decisions. Furthermore, any views, analyses, or forecasts in this article do not constitute investment advice to readers and shall not be held liable for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Past performance does not represent future results. Fund investment carries risks; please invest cautiously.
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