Hang Seng Tech Breaks Below Bull-Bear Line: What's the Signal? Bottom-Fishing Funds Flow Into Hong Kong's "Unique Assets"

On December 17, Hong Kong stocks fell sharply, with the Hang Seng Technology Index dropping nearly 3% at one point, breaching its annual moving average (the bull-bear demarcation line). Analysts suggest the recent two-month correction in Hong Kong tech stocks reflects multiple pressures, including liquidity, fundamentals, and valuation.

On the liquidity front, southbound capital inflows have slowed recently, possibly due to new fund regulations. The "Guidance on Performance Assessment Management for Fund Management Companies (Draft for Comment)" strengthens performance benchmark constraints. Since these benchmarks primarily track A-share indices, this may create selling pressure on Hong Kong stocks. Additionally, the Fed's hawkish rate-cut stance has added uncertainty to external liquidity.

Furthermore, Hong Kong stocks have accumulated gains this year, but year-end capital inflows remain weak, compounded by geopolitical factors dampening market sentiment.

However, the early release of risks also presents opportunities for re-entry at year-end and positioning for 2026. As "unique assets" in Hong Kong, internet stocks have attracted fund inflows. Data from the Shanghai Stock Exchange shows that the Hong Kong Internet ETF (513770) has seen nine consecutive days of net inflows, totaling 853 million yuan.

As tech leaders deeply embedded in the global AI industry chain, Hong Kong internet stocks trade at significantly lower valuations. The current PE (TTM) of the CSI Hong Kong Stock Connect Internet Index stands at just 24.92x, near the 27.24th percentile of its five-year range—markedly below the tech valuations represented by the ChiNext Index and Nasdaq 100.

Looking ahead to 2026, China Merchants Securities believes policy optimizations in the Stock Connect mechanism, QDII quota relaxations, tax policy improvements, high-quality Hong Kong listings, and regulatory encouragement of long-term investment will continue attracting southbound capital. They estimate an additional 1.54 trillion HKD in long-term southbound funds by end-2026, serving as a key driver for Hong Kong's market liquidity restructuring and valuation system optimization.

Industrial Securities notes that medium-to-long term, Hong Kong's market will become pivotal in developing China's new quality productive forces. Significant potential remains for both earnings growth and valuation re-rating in 2026, particularly for large-cap growth and dividend assets.

The Hong Kong Internet ETF (513770) and its feeder funds (Class A 017125; Class C 017126) track the CSI Hong Kong Stock Connect Internet Index, heavily weighted in internet leaders like Alibaba-W, Tencent Holdings, and Xiaomi Group-W. Its top 10 holdings—concentrated in AI cloud computing, large models, and cross-sector AI applications—account for over 73% of the portfolio, showcasing clear leadership advantages. With assets exceeding 10 billion yuan and average daily turnover over 600 million yuan, this ETF supports intraday T+0 trading without QDII quota constraints.

For investors bullish on Hong Kong tech but seeking lower volatility, the pioneering Hong Kong Large Cap 30 ETF (520560) offers a "tech + dividends" barbell strategy. Its portfolio combines high-beta tech stocks (Alibaba, Tencent) with stable high-dividend plays (China Construction Bank, Ping An), making it an ideal core holding for long-term Hong Kong exposure.

Caution: Recent market volatility may remain elevated, and short-term performance doesn't predict future returns. Investors must assess personal financial conditions and risk tolerance, emphasizing position and risk management.

Data shows the CSI Hong Kong Stock Connect Internet Index's annual returns for 2020-2024 were +109.31%, -36.61%, -23.01%, -24.74%, and +23.04% respectively. Index constituents adjust per rules—past performance doesn't guarantee future results.

Risk Disclosure: The Hong Kong Internet ETF passively tracks the CSI Hong Kong Stock Connect Internet Index (base date: 2016.12.30; launch: 2021.1.11). Constituent stocks shown don't constitute investment advice or reflect fund holdings. The fund carries an R4 (higher risk) rating, suitable for aggressive (C4+) investors. All information herein is for reference only—investors bear full responsibility for decisions. Views expressed don't constitute advice, and no liability is accepted for direct/indirect losses. Past fund performance doesn't guarantee future results—invest with caution.