On a turbulent Tuesday, the Hong Kong market witnessed a significant sell-off in hard technology stocks. The largest and most liquid Hong Kong Stock Connect Information Technology ETF, the Huabao Hong Kong Stock Connect Information Technology ETF (159131), which had hit a record high just the day before, experienced a sharp pullback. Its on-market price closed down 5.13%. However, the discount widened in the afternoon session, attracting substantial investor interest. The fund saw net subscriptions exceeding 70 million units for the day, with total subscriptions reaching 104 million units.
Among the index's top ten constituent stocks, nearly all declined, with only Huahong Grace managing a 1% gain. SMIC fell over 1%, while Xiaomi Group and Lenovo Group dropped more than 4%. Kingboard Holdings plunged 9%.
Assessing the Market Outlook
Following the steep decline in Hong Kong's hard tech sector, what lies ahead? Some analysts suggest that while the AI hardware supply chain may face short-term pressure, from a medium-term perspective, the AI computing power industry chain, semiconductors, and internet platforms remain the most scarce and growth-oriented sectors within the Hong Kong market. They recommend focusing on sub-sectors with strong profit visibility, such as semiconductor equipment/materials, and AI platform applications and software.
Performance Highlights
Over the past six months, the underlying index of the Huabao Hong Kong Stock Connect Information Technology ETF (159131), the CSI Hong Kong Stock Connect Information Technology Composite Index, has surged more than 24%. This performance has significantly outpaced the Hang Seng TECH Index by 40%, the HK Connect Technology Index by 41%, and the HK Connect Internet Index by over 58%, demonstrating notable sharpness and resilience.
ETF Profile and Strategy
The Huabao Hong Kong Stock Connect Information Technology ETF (159131) is positioned as a pure-play hard tech fund for the Hong Kong market, supporting T+0 trading. It is the first and largest ETF of its kind, tracking an index composed of "80% hardware + 20% software." The fund heavily invests in Hong Kong-listed companies within semiconductors, electronics, and computer software, covering 60 hard tech firms. The combined weight of the two wafer foundry giants, SMIC and Huahong Semiconductor, exceeds 21%. The domestic AI PC leader, Lenovo Group, holds a 15.89% weighting, while the PCB leaders, Kingboard Holdings and Kingboard Laminates Holdings, together account for over 10%. These weightings are the highest among all market-tracking products for this index. Furthermore, the index recently included new high-profile hard tech entrants like Zhipu and Biren Technology. Notably, the index excludes large-cap internet giants such as Alibaba, Tencent, and Meituan, aiming for higher concentration to better capture trends in Hong Kong's AI hardware sector.
Important Disclaimers
The Huabao Hong Kong Stock Connect Information Technology ETF and its feeder fund passively track the CSI Hong Kong Stock Connect Information Technology Composite Index. The index's base date is November 14, 2014, and it was launched on June 23, 2017. Constituent stocks mentioned are for illustrative purposes only and do not constitute investment advice or represent the fund manager's holdings or trading intentions. This product is issued and managed by Huabao Fund. Distributors are not responsible for the investment performance or redemption of the product. Investors should carefully read the Fund Contract, Prospectus, and Key Facts Statement to understand the fund's risk-return profile and choose products suitable for their own risk tolerance. Past performance of the fund or index does not guarantee future results. Fund investments carry risks. The fund manager assesses this fund's risk level as R4 (Medium-High Risk), suitable for Aggressive (C4) and above investors. Sales institutions provide their own risk assessments; investors should follow the matching results from their sales institution. The China Securities Regulatory Commission's registration of this fund does not indicate a judgment or guarantee of its investment value, market prospects, or returns.
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