Today's session saw a continuation of the divergent performance among Hong Kong's major indices, with the Hang Seng Index posting a mild gain while the Hang Seng Tech Index faced slight pressure. The global semiconductor sector experienced a significant sell-off, dragging down related ETFs tracking indices like the STAR 50 and South Korea. In contrast, the innovative drug sector delivered a strong performance following policy announcements regarding medical insurance. The Hang Seng Index rose 0.76% to close at 23,055.03 points, with a total turnover of HK$369.633 billion. The Hang Seng Tech Index fell 0.4% to 4,454.28 points.
Among major Hong Kong-listed ETFs, the Tracker Fund (02800) gained 0.95% to HK$23.50. The CSOP 2x Long SK Hynix ETF (07709) plunged 26.44% to HK$109.60, while the CSOP Hang Seng Tech Index ETF (03033) declined 0.59% to HK$4.364.
Sector Performance Highlights
Semiconductor Sell-Off Weighs on Tech ETFs
The global chip sector faced heavy selling pressure, weighing on the technology hardware segment and causing significant declines in ETFs tracking the STAR 50 and South Korean markets. The CSOP 2x Long Samsung ETF (07747) dropped 26.57% to HK$123. The TR Korea ETF (02848) fell 10.21% to HK$1,763.50, and the CSOP STAR 50 ETF (03109) declined 10.01% to HK$19.24.
The downturn was triggered by market concerns over potential "computing power oversupply" following reports that Meta is planning to enter the cloud infrastructure market by selling excess AI computing capacity and model access to external clients. This news led to a 6% overnight plunge in the Philadelphia Semiconductor Index. The negative sentiment spread to Asian markets, with South Korea's KOSPI index falling over 6%, triggering a circuit breaker, and shares of SK Hynix and Samsung Electronics tumbling. The A-share STAR 50 index also dropped more than 8% intraday, with related ETFs weakening in tandem.
Analysis suggests the recent AI and semiconductor rally was primarily driven by industry narratives, with capital chasing long-term potential without sufficient focus on earnings, order books, and profit realization, leading to inflated valuations. The current correction reflects a shift in market pricing logic, where investors are now demanding evidence of landed orders, stable profit margins, and sustainable capital expenditure capabilities from companies. However, the view remains that this pullback represents a phase of valuation adjustment rather than a refutation of the core AI-driven semiconductor upcycle. Several institutions maintain a positive industry outlook, with reports indicating the AI semiconductor upcycle has not yet peaked. A potential supply-demand mismatch in the second half of 2026 could extend the high-growth cycle for another one to two years.
Policy Support Fuels Gains in Biotech ETFs
Innovative drug ETFs performed strongly following the implementation of new medical insurance and commercial health insurance policies. At the close, the Huatai-PineBridge Innovative Drug ETF (517120.SH) surged 8.18% to RMB 0.767. The ICBC Innovation Drug ETF (159217.SZ) rose 4.4% to RMB 1.092, and the Penghua Innovation Drug ETF (159286.SZ) gained 3.89% to RMB 0.695.
The National Healthcare Security Administration released the preliminary review results for the 2026 medical insurance drug list, with 557 drugs passing the initial review for the national reimbursement list and 54 drugs passing the review for the commercial insurance innovative drug directory. This marks a substantive step forward in the dual-track negotiation process involving both public and private insurance. Concurrently, new mechanisms like a pre-application system and an 8-year price protection policy have been implemented, further refining the payment system for innovative drugs and providing more stable policy expectations for their commercialization.
Market observers note that as AI-related trades become increasingly crowded, some capital may seek rotation into undervalued sectors, potentially opening a new window for allocating to the innovative drug space. A key development is the first-time introduction of a "pre-application" mechanism in the 2026 directory adjustment. For drugs and indications submitted under this pre-application, relevant authorities have been requested to verify details, and companies must supplement their formal drug registration certificates and instructions by July 3. Analysts believe this change could significantly compress the historical 1- to 2-year gap between drug approval and inclusion in the national reimbursement list. Industry experts suggest the pre-application mechanism could shorten the medical insurance access cycle for innovative drugs by approximately one year, while also accelerating the commercial ramp-up post-inclusion.
Broader Market Perspective
Following a period of market consolidation that began in mid-May, a recovery emerged after early June, though indices remain below their previous highs. Sector-wise, with popular thematic investments showing high cumulative gains and elevated crowding, attention has turned towards style rebalancing. From a global perspective, the easing of crude oil supply disruptions after the reopening of the Strait of Hormuz has seen WTI crude fall to around $70 per barrel, significantly reducing its inflationary pressure. However, the monetary policy stance of Federal Reserve officials continues to periodically influence investor expectations regarding U.S. monetary policy.
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