The three major Hong Kong stock indices posted strong gains today, with the Hang Seng Tech Index leading the charge by rising over 3% at one point during the session.
A confluence of significant AI-related news and expectations for improved overseas liquidity fueled a collective rally in the Hong Kong internet sector, while the ongoing "deleveraging" process in global markets continued to pressure STAR 50 ETFs, which extended their losing streak.
At the close, the Hang Seng Index rose 1.33% to 25,008.6 points, with a total turnover of HK$322.892 billion.
The Hang Seng Tech Index gained 1.98% to finish at 4,834.44 points.
Among major Hong Kong-listed ETFs by size, the Tracker Fund of Hong Kong (02800) closed up 1.43% at HK$25.46, while the CSOP 2x Long Hynix ETF (07709) fell sharply by 21.32% to HK$56.48.
The CSOP Hang Seng TECH Index ETF (03033) advanced 2.15% to close at HK$4.748.
Sector Performance Highlights
A series of major AI announcements, combined with anticipation of better overseas liquidity conditions, drove a broad-based surge in Hong Kong's internet stocks, with related ETFs among the top gainers.
By the market close, the HuaBao Hong Kong Internet ETF (513770.SH) surged 4.41% to ¥0.379.
The E Fund Hong Kong Stock Connect Internet ETF (513040.SH) climbed 3.65% to ¥0.995, and the Fullgoal Hong Kong Stock Connect Internet ETF (159792.SZ) rose 3.34% to ¥0.619.
Key developments included the deep integration of Alibaba's Qwen large language model into Apple's ecosystem for China and Tencent's Hunyuan model achieving a top global call volume, providing solid support for the sector's upward move.
Analysts at Goldman Sachs noted the current valuation gap between A-share and H-share tech stocks has reached an extreme historical level, suggesting a gradual increase in holdings of large Hong Kong-listed internet companies is warranted.
The core rationale is that Hong Kong internet stocks are expected to narrow the gap with A-share hard tech counterparts across fundamentals, valuations, and liquidity.
They anticipate performance for leading Hong Kong internet stocks to improve in the coming months, with larger-cap tech leaders entering a watch zone as compressed valuations hold potential for a rebound.
Following a surprise weakening in US June CPI, the US PPI also came in softer than expected, bolstering expectations for improved global liquidity.
Other analysts point out that in the interim period before Google kicks off the earnings season for hyperscalers in late July, leading Hong Kong internet companies already have a foundation for a phased recovery.
The logic extends beyond "Hong Kong stocks being cheap" to a rebalancing of risk-reward between US and Chinese AI assets, they argue.
Before this earnings validation arrives, there is potential for funds to rotate from high-flying hardware stocks to undervalued internet leaders, with cooling expectations for further US rate hikes providing additional liquidity support.
STAR Market 50 ETFs Under Pressure
The ongoing "deleveraging" process in international markets continues to impact local markets, with STAR 50 ETFs declining for consecutive sessions.
At the close, the CSOP STAR 50 ETF (03109) dropped 4.91% to HK$17.82.
The Bosera STAR 50 ETF (02832) fell 4.66% to HK$13.3, and the PPF STAR 50 ETF (03151) declined 4.57% to HK$12.95.
This deleveraging trend is a global phenomenon, with the South Korean government reportedly studying measures to address the market impact of single-stock leveraged ETFs.
Some securities firms attribute the sharp adjustments in A-shares and overseas tech stocks directly to deleveraging activities in overseas trading, with A-shares following indirectly.
Futures analysts note that high-flying tech stocks continue to experience volatility, with the STAR Market Index still retreating significantly, contributing to overall weakness in major broad-based indices.
They observe that the strength of the overseas AI narrative has far exceeded expectations, with US capital expenditure yet to show clear signs of weakening, preventing a substantive correction in the Nasdaq.
This pattern of sharp alternating gains and losses for indices is expected to persist in the near term, with high market volatility not yet significantly abating.
Notably, market reports on July 16 indicated that South Korea's Financial Services Commission announced regulatory measures targeting single-stock leveraged ETFs.
These include tightening margin requirements for such trades, raising the minimum from 10 million won to 30 million won, and mandating cash as the only acceptable form of collateral.
Furthermore, South Korea will prohibit the listing of new single-stock leveraged products.
Industry participants suggest that stricter access requirements are expected to limit some retail investor participation in high-leverage products, which could positively contribute to easing short-term market volatility from an investor protection perspective.
Institutional Perspectives
Fund managers note that the Hong Kong market is currently in a phase of volatile recovery, presenting relatively lower downside risk and valuations compared to other markets.
They believe that as external risk sentiment diminishes and corporate earnings recover, upside potential and opportunities will further expand, with the possibility of capital returning if rebalancing occurs.
Other analysts attribute the recent strong rebound in Hong Kong stocks primarily to catalysts like Alibaba's earnings preview.
They suggest that the phase of repair based on oversold conditions may have concluded, and further market upside will depend on upward revisions to overall Hong Kong corporate profits and an increase in AI-related revenue contribution from leading companies, which will be validated during the upcoming interim reporting season.
New ETF Listings
The New Harvest CSI STAR AI ETF (589410.SH) debuted today, closing down 2.62% at ¥0.928 with a turnover of ¥69.59 million.
The fund tracks the SSE STAR Market Artificial Intelligence Index, focusing on AI-related software and hardware sectors on the STAR Market, including companies involved in AI chips, computing power, and software.
The E Fund Hong Kong Stock Connect Financials ETF (159091.SZ) also listed for the first time, ending the day 0.60% lower at ¥1.00 with a turnover of ¥148 million.
This fund tracks the CSI Hong Kong Stock Connect Mainland Financials Index, investing in leading Hong Kong-listed mainland financial sector companies such as banks and insurers.
The New Guotai Haitong CSI Dividend Low Volatility ETF (560730.SH) made its market debut, closing down 1.38% at ¥1.002 with a turnover of ¥363 million.
This ETF follows the CSI Dividend Low Volatility Index, with a portfolio heavily weighted towards high-dividend blue-chip stocks.
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