Recent weakness in Hong Kong stocks has been driven by southbound capital outflows due to new mutual fund benchmark regulations, peak IPO lock-up expirations, and overseas liquidity pressures from Bank of Japan rate hike expectations. However, as AI vertical applications commercialize, tech sector valuations are transitioning from sentiment-driven recovery to value creation, potentially unlocking further profit potential. Despite the market correction, capital is flowing counter-cyclically into Hong Kong's tech sector.
Since November 2025, all Hang Seng Tech Index-tracking ETFs have seen combined inflows of RMB 27 billion. The popular Hang Seng Tech ETF (513130) recorded net inflows for 25 consecutive trading days, absorbing RMB 4.7 billion with 6.2 billion new shares created. As of December 15, 2025, the fund's assets under management grew 112% year-to-date to RMB 42.4 billion, establishing it as a key vehicle for accessing Hong Kong's tech leaders.
This capital inflow reflects market confidence in the sector's medium-term fundamentals. Domestic large model competition is intensifying, with major internet companies launching public tests of Qianwen App in November 2025 and accelerating multi-scenario integration. Device-side AI (including smart glasses) has become a focus for internet and auto giants. Q3 2025 earnings showed internet leaders' revenue recovery, with "AI+cloud" emerging as a common growth driver, indicating AI strategies are now revenue-contributing.
Policy support has also materialized. The Central Economic Work Conference prioritized innovation-driven development and cultivating new growth engines, specifically highlighting the Greater Bay Area's role as an international tech hub and "AI+" industrial upgrades, backed by financial support and IP protection measures.
The recent pullback has improved valuation attractiveness. The Hang Seng Tech Index's current P/E of 23.13x sits at the 34.20% percentile of its 5-year range, comparing favorably to the Nasdaq 100 (41.09x) and STAR 50 (156.57x).
Looking ahead, anticipated Fed rate cuts improving global liquidity, coupled with Chinese tech leaders' stable earnings since Q3 2025 and ongoing AI/cloud commercialization, suggest the sector's post-correction valuations may enhance long-term investment appeal amid clear policy support and industrial logic.
Tracking the 30-component Hang Seng Tech Index spanning internet, media, software, autos and chips, Hang Seng Tech ETF (513130) offers comprehensive exposure to Hong Kong's tech ecosystem. With RMB 42.4 billion AUM, strong liquidity, 0.2% management fee and intraday T+0 trading, it serves as an efficient core allocation tool. OTC investors can consider its feeder funds (Class A 015310/Class C 015311).
Risk Disclosure: Investments involve risks. Past performance doesn't indicate future results. The Hang Seng Tech Index is calculated by Hang Seng Indexes Company, which bears no liability for index inaccuracies. Investors should assess risk tolerance and review fund documents carefully, noting additional currency and overseas market risks for QDII products.
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