Hong Kong stocks opened higher but retreated during the session, briefly turning negative in the afternoon before all three major indexes closed in positive territory. Concerns over the global 'closed-loop investment' model in AI triggered a structural crisis for South Korean leveraged ETFs, leading to sharp declines. Meanwhile, marginal data showing a gradual recovery path supported a modest uptick in consumer and food & beverage ETFs.
At the close, the Hang Seng Index rose 0.41% to 25,310.85 points, with total turnover reaching HKD 250.633 billion. The Hang Seng Tech Index gained 0.61% to 4,730.61 points. Among the top Hong Kong ETFs by scale, Tracker Fund of Hong Kong (02800) closed up 0.39% at HKD 25.8, while CSOP Hang Seng Tech Index ETF (03033) rose 0.61% to HKD 4.644. In contrast, CSOP 2x SK Hynix Daily (07709) plummeted 30.24% to HKD 38.02.
Market Sector Performance
1. Global AI 'Closed-Loop Investment' Concerns and Structural Crisis in Korean Leveraged ETFs Trigger Heavy Losses
South Korean ETFs experienced significant declines. CSOP 2x SK Hynix Daily (07709) fell 30.24% to HKD 38.02, CSOP 2x Samsung Electronics Daily (07747) dropped 26.73% to HKD 61.12, and CSOP S Korea-HK Tech Index ETF (03431) slipped 6.37% to HKD 9.475. The South Korean market faced a dual crisis of domestic and external pressures. The KOSPI index once plunged over 11% intraday, triggering a circuit breaker, while Samsung Electronics and SK hynix both fell more than 12% during the session. On the domestic front, the Chairman of South Korea's Financial Services Commission, Lee Bok-hyun, stated that if the latest regulatory measures fail to achieve the desired effect, the government may consider further restricting retail investors' access to leveraged ETFs, including setting individual investment limits. A Goldman Sachs strategy team noted that the recent sell-off in the South Korean market is primarily driven by the concentrated deleveraging of leveraged ETFs, with 'no underlying fundamental deterioration or earnings revision signals.' However, the market structure, where two heavyweight stocks account for 60% of the index and leveraged capital is highly concentrated in these two stocks, makes the market highly susceptible to amplification during external shocks. Externally, concerns over the financing model in AI infrastructure construction were fueled by a record single-day surge in the price of NVIDIA's credit default swaps (CDS). The core worry is the 'circular' nature of this model: NVIDIA provides financing or guarantees to its customers, who in turn purchase its chips. If AI demand falls short of expectations, losses would be amplified across the entire chain. Manish Kabra, Head of US Equity Strategy at Societe Generale, commented, 'For hyperscalers, we now need to look at CDS, not EPS. CapEx in AI is still outpacing cash generation, pushing free cash flow for technology groups towards cyclical lows.'
2. Marginal Data Shows a Gradual Recovery Path, Consumer ETFs Edge Higher
Consumer-focused ETFs saw modest gains. The E Fund Consumer ETF (159798.SZ) rose 2.6% to RMB 0.869, the China Universal CSI Food & Beverage ETF (515170.SH) gained 2.17% to RMB 0.47, and the Fullgoal Consumer 50 ETF (515650.SH) increased by 2.08% to RMB 1.082. Recent data from the National Bureau of Statistics showed that China's total retail sales of consumer goods grew 1% year-on-year in June, turning positive from negative growth. Restaurant revenue also improved, rising 1.2% year-on-year, indicating a marginal recovery. Guotai Junan Securities believes that the recovery trend for mass consumer goods is clear for the full year. Considering the low base from June and the weak demand recovery, the marginal trend of recovery is expected to strengthen further. Given the growth certainty and valuation levels, the value of leading health food and soft drink companies is now apparent. CITIC Securities pointed out that the pricing power logic for the food and beverage sector is strengthening, highlighting its defensive attributes. Against a backdrop of macroeconomic volatility, leading companies with strong pricing power, stable cash flows, and defensive characteristics are likely to become safe havens for capital. Meanwhile, previously defensive sectors like baijiu (liquor) have experienced a pullback, suggesting a market style rotation from low-dividend yield plays towards tech growth recovery.
Institutional Views
Fullgoal Fund stated that the market remains in a 'painful' phase of external geopolitical risks and the release of internal crowding risks. However, the signal from domestic policy support is already quite clear, and the market is in the process of building a short-term bottom. Looking ahead, during this bottom-building process, it is necessary to maintain strategic patience, waiting for the resolution of uncertainties such as the progress of offshore deleveraging, earnings report validation, and monetary policy guidance. The nearing end of 'selling emotion' and the emergence of strategic buying opportunities based on 'buying the fact' are likely to appear.
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