In recent days, Alibaba Group Holding Ltd (HKG: 9988) has seen substantial gains, following a surge of over 12% yesterday, with its shares rising more than 5% intraday today (July 9th). The capital flow for the Huabao Hong Kong Internet ETF (SHH: 513770), which is heavily invested in leading internet companies, has reversed course. Yesterday, it attracted a net inflow of 278 million yuan, indicating a significant increase in investor attention.
What's Driving the Surge in the Hong Kong Internet Sector?
The recent surge in the Hong Kong internet sector, which has been in a low range, prompts the question: is this a short-term rebound or a trend reversal? Feng Chencheng, the fund manager of the Huabao Hong Kong Internet ETF (SHH: 513770), provides an urgent analysis, highlighting four key logics.
First, on July 7th, the central bank governor reaffirmed at the Hong Kong Monetary and Fixed Income Summit that "over the past year, the national foreign exchange reserves have consistently conducted asset allocation and investment transactions in Hong Kong, and the proportion will continue to be increased in the future." This direction was first proposed at the Asian Financial Forum opening on January 13th last year. Mentioning it again this year, amidst three consecutive quarters of weakness in the Hong Kong stock market, carries a message of maintaining overall financial stability and security.
Second, the recent decline in the South Korean stock market has led to a rapid correction in the global memory sector. The outperformance curve of the so-called "Magnificent Seven" US stocks relative to the Nasdaq index has begun to turn, indicating a shift in style preference within the tech sector from growth leaders towards established value leaders.
Third, since last October, the decline in the Hong Kong internet sector has been significantly greater than that of the Hang Seng Tech Index, with the sector's monthly K-line chart showing five consecutive months of decline. Looking at the reversal starting from the end of June, the Hong Kong internet sector has clearly outperformed the Hang Seng Tech Index.
Fourth, at the end of June, the price-to-earnings (PE) ratio of the internet sector was approximately 0.64 times that of the US Nasdaq 100 Index, which is at an extremely low level over the past year. The historical median level is around 0.72 to 0.75 times, highlighting the current attractive valuation.
Looking Ahead: Key Signals to Monitor
Looking ahead, Feng Chencheng suggests focusing on several key signals: the trend of the US dollar index, the performance of major US tech stocks, the seesaw effect between the Hong Kong hard tech and internet sectors, and the forward-looking insights from the second-quarter reports of leading Hong Kong internet companies.
Attention is drawn to the potential value re-rating of Hong Kong internet leaders amid the AI transformation. The Huabao Hong Kong Internet ETF (SHH: 513770) and its feeder funds (Class A: 017125; Class C: 017126) passively track the CSI Hong Kong Stock Connect Internet Index. The top ten holdings aggregate tech giants like Alibaba Group Holding Ltd (HKG: 9988) and Tencent Holdings Ltd, as well as AI application companies across various sectors, showcasing significant leading advantages. They offer intraday T+0 trading with good liquidity.
For those bullish on Hong Kong tech but seeking to reduce volatility, consider the first-of-its-kind Huabao Hong Kong Large Cap 30 ETF (SHH: 520560). It employs a "tech + dividends" barbell strategy, with heavy holdings including high-volatility tech stocks like Alibaba Group Holding Ltd (HKG: 9988) and stable, high-dividend stocks from sectors like banking and insurance, making it an ideal core holding tool for long-term Hong Kong market allocation.
Important Investment Considerations
Investors are reminded that recent market volatility may be significant, and short-term gains or losses do not predict future performance. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying high attention to position sizing and risk management.
ETF Fee Information: When subscribing for or redeeming fund shares, subscription/redemption agencies may charge a commission of up to 0.5%, which includes related fees charged by stock exchanges and registration institutions. Feeder Fund Fee Information: For the Huabao CSI Hong Kong Stock Connect Internet ETF Feeder Fund (Class A), the subscription fee (front-end load) is a flat 1,000 yuan per transaction for subscriptions over 2 million yuan, 0.6% for subscriptions between 1 million (inclusive) and 2 million yuan, and 1% for subscriptions below 1 million yuan. The redemption fee is 1.5% for holding periods under 7 days and 0% for holding periods of 7 days (inclusive) or more; no sales service fee is charged. The Huabao 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 (inclusive) or more; the sales service fee is 0.3%.
Risk Disclosure
The Huabao Hong Kong Internet ETF and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. The base date of this index is December 30, 2016, and it was published on January 11, 2021. The composition of the index constituents is adjusted according to the index compilation rules. The index constituents mentioned 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动向 of any fund managed by the fund manager. The fund manager assesses the risk level of this fund as R4 - Medium to High Risk, suitable for aggressive (C4) and above investors. Any information appearing in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, any form of expression, etc.) is for reference only. Investors are solely responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to the reader, nor shall they 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 guarantee the performance of this fund. Past performance of a fund is not indicative of its future results. Fund investment involves risk; caution is advised when investing in funds.
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