The Hong Kong stock market's internet sector continued its upward trajectory on July 9th, with leading stock Alibaba Group Holding Ltd (HKEX: 9988) surging nearly 5% intraday after a significant gain of over 12% the previous day. The underlying index tracked by the Hong Kong Internet ETF, the CSI Hong Kong Stock Connect Internet Index, saw intraday gains exceeding 1.5%. Feng Chencheng, the fund manager of the Hong Kong Internet ETF, suggested that recent market shifts may indicate a rotation within the tech sector from growth leaders to large-cap value stocks.
Earnings previews for Alibaba's Q1 FY2027 indicate that its cloud revenue growth accelerated to approximately 45%, significantly surpassing market expectations. Overall e-commerce profitability (including China commerce and AIDC) recovered to a level flat year-over-year, also better than anticipated. Losses for the Taobao flash sales business narrowed faster than expected, with the unit economics gap to competitors shrinking and showing potential for further improvement, all while market share remained stable despite reduced subsidies.
On July 7th, senior officials from the People's Bank of China reaffirmed at the "Hong Kong Money and Fixed Income Summit" that "over the past year, national foreign exchange reserves have consistently conducted asset allocation and investment transactions in Hong Kong, and the proportion will continue to be increased in the future." This direction was first proposed by PBOC officials at the Asian Financial Forum opening on January 13th last year, emphasizing "expanding Hong Kong's financial development space through foreign exchange reserve allocation in Hong Kong."
Fund Manager Feng Chencheng noted that from January 13th to early March 2025, the Hong Kong internet sector once rallied over 50%, propelling the Hang Seng Index from 19,000 to above 24,000 points. The renewed emphasis on increasing the investment proportion this year, against the backdrop of a weakening Hong Kong market over the past three quarters, signals an intent to maintain overall financial stability and security. Recent declines in the South Korean stock market have led to a swift correction in the global memory chip sector, and the outperformance curve of the US "Magnificent Seven" tech giants relative to the Nasdaq Index has begun to turn. Feng believes this may signify a shift in style preference within the tech sector from growth leaders to large-cap value stocks.
Examining performance since the resumption of US-China trade tensions in 2025, the Hong Kong internet sector has underperformed the Hang Seng Tech Index significantly since October 2025, with its monthly chart showing five consecutive months of decline. However, the rebound starting from late June this year shows the internet sector clearly outperforming the Hang Seng Tech Index. Feng pointed out that as of the end of June, the PE ratio of the CSI Hong Kong Stock Connect Internet Index was approximately 0.64 times that of the US Nasdaq 100 Index, near its one-year low. Its historical median level is around 0.72-0.75 times, highlighting the relative investment value of the Hong Kong internet sector compared to US stocks.
Regarding future investment opportunities in the Hong Kong internet sector, Feng Chencheng suggested investors monitor several key factors: whether the US Dollar Index continues to decline, whether US long-term bond yields reach new yearly highs, the relative strength of major US tech stocks (represented by the "Magnificent Seven"), the seesaw effect between the hard tech and internet sectors, and the Q2 earnings previews for leading Hong Kong internet companies.
Focus on the potential value re-rating of Hong Kong internet leaders in the AI era. The Hong Kong Internet ETF and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. The index's top ten holdings include tech giants like Alibaba Group Holding Ltd and Tencent Holdings Ltd, as well as AI application companies across various sectors, showcasing significant leading advantages. The ETF offers intraday T+0 trading with good liquidity.
Investors are reminded that recent market volatility may be high, and short-term performance is not indicative of future results. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position sizing and risk management.
Data sources include the Shanghai and Shenzhen Stock Exchanges.
ETF Fee Information: When subscribing for or redeeming fund units, subscription/redemption agents may charge a commission of up to 0.5%, which includes relevant fees charged by stock exchanges and registration institutions.
Feeder Fund Fee Information: For the Class A shares of the feeder fund, the subscription fee (front-end load) is 1% for amounts below 1 million RMB, 0.6% for amounts between 1 million and 2 million RMB, and a flat fee of 1,000 RMB for amounts of 2 million RMB or above. The redemption fee is 1.5% for holdings under 7 days and 0% for holdings of 7 days or more. No sales service fee is charged. For the Class C shares, no subscription fee is charged. The redemption fee is 1.5% for holdings under 7 days and 0% for holdings of 7 days or more. A sales service fee of 0.3% per annum applies.
Risk Disclosure: The Hong Kong Internet ETF and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. The index base date is December 30, 2016, and it was launched on January 11, 2021. The index's performance for the past five full calendar years is as follows: 2025: +27.02%; 2024: +23.04%; 2023: -24.74%; 2022: -23.01%; 2021: -36.61%. Index constituents are adjusted according to the index methodology. Constituent stocks mentioned are for illustrative purposes only; descriptions of individual stocks do not constitute investment advice in any form nor represent the holdings or trading动向 of any fund managed by the asset manager. The fund manager assesses this fund's risk等级 as R4 - Medium to High Risk, suitable for Aggressive (C4) and above investors. Any information appearing in this article is for reference only. Investors are responsible for their own investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to readers, and no responsibility is taken for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee this fund's performance. Past performance of the fund is not indicative of its future results. Fund investment carries risks; invest with caution.
Comments