Hong Kong's hard technology sector experienced a significant pullback today (July 13th). Shares of companies including Kingboard Holdings Ltd, Kingboard Laminates Holdings Ltd, and GigaDevice Semiconductor Inc (Beijing) fell over 10%. The largest and most liquid* ETF tracking this sector, the HK Connect Information Technology ETF Huabao (159131), saw its on-market price drop 4.86%, with approximately 26 million units purchased on the dip during the session.
Has the current AI rally reached its peak? Guosen Securities analysis suggests that the AI-related sector, particularly upstream hardware, has seen an extended period of strong performance, yet future long-term earnings expectations remain high. Historical analysis of six high-growth industries over the past two decades indicates that stock price peaks can occur early in the adoption cycle, even during periods of high growth momentum. High-growth sectors often experience a double-top pattern, with the secondary peak potentially reaching 80-90% of the absolute high. During this process, the market's reaction to positive news may become muted, and divergence in growth outlooks can widen. The key to confirming a peak in this AI cycle lies in monitoring the capital expenditure (Capex) plans of major tech giants. While overall expectations have not yet reversed, a deceleration in the rate of Capex growth (the second derivative) for some companies warrants caution.
Guojin Securities points out that on the demand side, AI computing power is driving an explosive increase in demand for high-end memory, with AI servers requiring significantly higher DRAM and NAND capacities compared to traditional servers. On the supply side, leading overseas memory manufacturers are allocating the majority of their advanced process capacity to HBM and high-end DDR5, squeezing production capacity for general-purpose memory. This widening supply-demand gap is driving both volume and price increases for memory chips. In this context, capital expenditures by overseas leaders have surged sharply. For instance, Micron's planned Capex for 2026 is as high as $27 billion, a 70.3% year-on-year increase. Coupled with the imminent listings and potential capacity expansions of domestic memory manufacturers, global memory chipmakers are structurally increasing their capital expenditures.
A rare 'pure-play' hard tech opportunity in Hong Kong! The HK Connect Information Technology ETF Huabao (159131) supports T+0 trading. As the first and largest ETF of its kind with superior liquidity, it tracks an index composed of "80% hardware + 20% software." The ETF focuses on Hong Kong-listed stocks in "semiconductors + electronics + computer software," encompassing 60 hard tech companies. The combined weighting of the two wafer foundry giants, Semiconductor Manufacturing International Corp and Shanghai Huahong Grace Semiconductor Manufacturing Corp, exceeds 26%. The domestic AI PC leader, Lenovo Group Ltd, holds a weighting of over 10%. The combined weighting of PCB leaders Kingboard Holdings Ltd and Kingboard Laminates Holdings Ltd exceeds 11%. These weightings are the highest among all indices with linked products in the market. Furthermore, the underlying index recently added several new Hong Kong-listed hard tech players, including Zhipu AI, Biren Technology, and Shenghong Technology Co Ltd on June 15th. The index excludes large-cap internet companies like Alibaba Group Holding Ltd, Tencent Holdings Ltd, and Meituan, offering higher concentration and a more targeted exposure to capture the Hong Kong AI hardware thematic trend.
*Note: "First of its kind" refers to the HK Connect Information Technology ETF Huabao being the first ETF in the market to track the CSI HK Connect Information Technology Composite Index. As of June 30, 2026, the ETF's latest on-market size was RMB 1.979 billion, making it the largest among the 8 ETFs tracking the same index. Its year-to-date average daily turnover was RMB 689 million, the highest among the 8 ETFs. The historical annual returns of the underlying index, the CSI HK Connect Information Technology Composite Index (HKD), for 2021-2025 were: -9.54%, -34.47%, -0.25%, 21.58%, 39.30% respectively. Its annualized volatility for 2021-2025 was: 4.13%, 4.63%, 4.00%, 5.49%, 5.45% respectively. Past index performance does not guarantee future results. Recent market volatility may be significant, and short-term gains or losses do not predict future performance. Fund investments may incur losses. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying high attention to position sizing and risk management.
Fund Fee Note: Subscription and redemption agents for the HK Connect Information Technology ETF Huabao may charge a commission of up to 0.5%. On-market transaction fees are subject to the actual charges by securities firms. No sales service fee is charged.
Risk Warning: The HK Connect Information Technology ETF Huabao and its feeder fund passively track the CSI HK Connect Information Technology Composite Index. The index base date is November 14, 2014, and its release date is June 23, 2017. The index constituents mentioned in this material are for illustrative purposes only. Descriptions of individual stocks do not constitute investment advice in any form and do not represent the holdings or trading动向 of any fund managed by the fund manager. This product is issued and managed by Huabao Fund. Distributors do not assume responsibility for the investment performance or redemption of the product. Investors should carefully read the Fund Contract, Prospectus, Fund Product Key Facts Statement, and other legal documents to understand the fund's risk-return characteristics and choose a product suitable for their own risk tolerance. Past fund performance does not predict its future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Fund investment involves risks. The fund manager assesses this fund's risk等级 as R4 - Medium to High Risk, suitable for Aggressive (C4) and above investors. Distributors (including the fund manager's direct sales channels and other distributors) conduct risk assessments of this fund according to relevant laws and regulations. Investors should pay timely attention to the appropriateness opinions issued by distributors and base their decisions on the matching results. Appropriateness opinions from different distributors may not be consistent. The fund product risk等级 evaluation results issued by distributors shall not be lower than the risk等级 evaluation result made by the fund manager. There may be differences between the fund's risk-return characteristics described in the Fund Contract and its risk等级 due to different considerations. Investors should understand the fund's risk-return profile and make prudent fund selection decisions based on their own investment objectives, horizon, experience, and risk tolerance, bearing the risks themselves. The China Securities Regulatory Commission's registration of this fund does not indicate a substantive judgment or guarantee of its investment value, market prospects, or returns. Funds carry risks; investment requires caution.
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