Analysts Identify First Bullish Window for Hong Kong Stocks This Year, Internet Sector Remains Top Allocation Choice

Hopes for a potential de-escalation in Middle East tensions emerged as Iran expressed willingness to end hostilities, provided it is ensured no further attacks occur. This sentiment contributed to gains across the three major U.S. stock indices overnight, with the Nasdaq Golden Dragon China Index rising nearly 3%.

On April 1st, Hong Kong stocks opened higher in sync, with both the Hang Seng Index and the Hang Seng Tech Index climbing over 2%. 00700 surged more than 4%, while 09988, 03690, and 09626 each gained over 3%. 03690 rose more than 2%, and Xiaomi Group-W advanced over 1%. The Hong Kong Stock Internet ETF Hua Bao (513770), a core tool for accessing Hong Kong's AI and internet sector, saw its on-exchange price increase by over 2%.

Affected by factors such as geopolitical conflicts, the Hong Kong stock market has experienced significant volatility recently. Southbound capital has continued to increase its positions, becoming an important source of incremental funds for the Hong Kong market. In the first quarter of this year, cumulative net inflows from southbound funds exceeded HKD 220 billion.

CITIC Securities points out that the bull market structure for Hong Kong stocks has not ended, and the current period represents the first worthwhile bullish window of the year. The internet and AI platform sectors are identified as the primary theme. In the short term, focus should be on the profit recovery of participants like 03690 following a moderation in subsidies for instant retail. For the medium term, attention should be on the efficiency gains from AI implementation in advertising, cloud, and e-commerce businesses at leading companies, as well as the sustainability of the commercial inflection point for 09626. Overall, sector opportunities are expected to come more from leading companies with stable core profits and gradually materializing new businesses.

Looking ahead to April, CITIC Securities believes it will be a critical verification period for Hong Kong stocks transitioning from an "emotional buying point" to an "earnings-driven buying point." The first-quarter reports and full-year guidance from internet and AI leaders will determine whether this rebound can evolve from a risk appetite recovery into an earnings-driven upward trend. Based on already disclosed results, some companies have provided relatively clear validation of revenue and profits, indicating that the most important thematic assets in Hong Kong still possess solid earnings support. Therefore, as long as marginal improvements in risk appetite continue, it is highly probable that capital will flow back to internet and AI leaders, reinforcing the internet sector as the top-priority allocation direction.

Positioning for the anticipated AI commercialization year in 2026, investors are advised to focus on core AI tools in the Hong Kong market. The Hong Kong Stock Internet ETF (513770) and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. Its top ten holdings aggregate tech giants like 09988 and 00700, along with AI application companies across various sectors, offering significant leading advantages. The fund offers intraday T+0 trading with good liquidity.

For those bullish on Hong Kong tech but seeking to reduce volatility, consideration can be given to the Hong Kong Large-Cap 30 ETF (520560). This fund employs a "tech + dividends" barbell strategy, with heavyweight holdings including high-growth tech stocks like 09988 alongside stable, high-dividend stocks from sectors like banking and insurance, making it an ideal long-term core holding tool for Hong Kong market exposure.

Investors are reminded that recent market volatility may be significant, and short-term price movements are not indicative of future performance. It is essential to invest rationally based on individual financial circumstances and risk tolerance, paying close attention to position sizing and risk management.

Data source: Shanghai and Shenzhen Stock Exchanges, etc.

ETF fee-related information: When subscribing for or redeeming fund shares, subscription/redemption agents may charge a commission of up to 0.5%, which includes relevant fees charged by stock exchanges and registration institutions. Feeder fund fee-related information: For the Hua Bao CSI Hong Kong Stock Connect Internet ETF Feeder Fund (Class A), the front-end subscription fee is a flat CNY 1,000 per subscription for amounts over CNY 2 million, 0.6% for amounts between CNY 1 million (inclusive) and CNY 2 million, and 1% for amounts below CNY 1 million. The redemption fee is 1.5% for holding periods under 7 days and 0% for holding periods of 7 days or more; no sales service fee is charged. The Hua Bao CSI Hong Kong Stock Connect Internet ETF Feeder Fund (Class C) charges no subscription fee. The redemption fee is 1.5% for holding periods under 7 days and 0% for holding periods of 7 days or more; the sales service fee is 0.3%.

Risk warning: The Hong Kong Stock Internet ETF passively tracks the CSI Hong Kong Stock Connect Internet Index. The base date for this index is December 30, 2016, and it was published on January 11, 2021. The composition of the index's constituent stocks is adjusted according to its compilation rules. The index constituents mentioned are for illustrative purposes only; descriptions of individual stocks are not investment advice in any form and do not represent the holdings or trading动向 of any fund managed by the management company. The fund manager assesses this fund's risk rating as R4 - Medium to High Risk, suitable for Aggressive (C4) and above investors. Any information appearing in this content is for reference only, and investors are solely responsible for their independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to the reader, and no liability is accepted 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 guarantee the performance of this fund. Past performance of the fund is not indicative of its future results. Fund investment carries risks, and caution is advised when investing in funds.