The Hong Kong stock market opened higher and then fell back today, with the three major indices turning negative towards the close. While Samsung's earnings surged, its stock price plummeted, dragging down the South Korean Composite Index and causing South Korea-focused ETFs to reverse course and plunge sharply. Samsung's third price hike for DRAM this year, however, drove related semiconductor equipment ETFs higher against the broader market trend.
As of market close, the Hang Seng Index fell 0.51% to 23,496.89 points, with a full-day turnover of HKD 319.711 billion. The Hang Seng Tech Index dropped 0.75% to 4,507.04 points.
Performance of Key ETF Products
Among the top ETFs in the Hong Kong market by size, the Tracker Fund of Hong Kong (02800) closed down 0.66% at HKD 23.92. The CSOP 2x Long SK Hynix ETF (07709) closed down 15.64% at HKD 91.7. The CSOP 2x Long Samsung ETF (07747) closed down 16.44% at HKD 123.25.
Major Sector and ETF Movements
Samsung's stellar preliminary earnings report, showing quarterly profit soaring nearly 19-fold, was followed by a stock price plunge of over 7%. SK Hynix also tumbled sharply, dragging down the South Korean Composite Index. South Korea-focused ETFs consequently reversed earlier gains and suffered heavy losses.
A Societe Generale analyst noted that while Samsung's results were strong, they did not provide a major positive surprise, as the market had largely priced in the strong performance during this year's rally. The analyst pointed out that in the short term, market sentiment holds more sway than earnings reports, which is the core reason for the pressure on memory stocks. The weakening price momentum has, in turn, impacted the flow of single-stock leveraged ETFs, creating additional pressure on the broader Korean market.
Nomura stated that chip-related stocks are under pressure due to concerns over supply-demand dynamics in the memory market and profit-taking in leveraged ETFs. In the short term, stock prices are driven by supply-demand relationships and investor sentiment. However, Nomura highlighted that chip manufacturers still possess upside catalysts from AI-related profit growth and expanding free cash flow.
Semiconductor Equipment Sector Gains
Samsung Electronics is negotiating DRAM prices for the third quarter, aiming to increase the average selling price for general-purpose DRAM by 20% compared to the previous quarter. LPDDR, which faces supply bottlenecks in both server and mobile applications, could see price increases exceeding 20%. This marks Samsung's third price hike for DRAM this year, following an approximate 90% surge in Q1 and a 50%-60% increase in Q2. This trend has driven a broad rally in memory chip prices, boosting the semiconductor equipment sector, with related ETFs climbing against the market trend.
At the close, the Huatai-PineBridge SSE STAR Semiconductor Equipment ETF (588710.SH) rose 3.56% to CNY 3.815. The ChinaAMC SSE STAR Semiconductor ETF (588170.SH) gained 3.36% to CNY 1.232. The Guotai SSE STAR Semiconductor Equipment ETF (159516.SZ) advanced 1.93% to CNY 1.747.
According to TrendForce data, the overall DRAM supply-demand situation is expected to remain extremely tight through Q3 2026, though contract price increases are projected to moderate to a quarterly range of 13% to 18% due to downward revisions in consumer application demand and the high base effect.
JPMorgan believes the current memory super-cycle will be "higher and longer," with the global memory TAM soaring from USD 214 billion in 2025 to USD 1.68 trillion by 2028, and DRAM revenue projected to reach USD 1.23 trillion in 2028. CPUs have become a core catalyst for the new round of memory price increases. From a supply-demand perspective, UBS believes the tight DRAM supply-demand situation will persist at least until the first half of 2028. Excluding the buffer effect of downstream customer inventory replenishment, the actual supply-demand gap in 2027 is expected to widen further to -13.6% from -8.1% in 2026, reaching an imbalance level rarely seen in the past 30 years.
Institutional Perspectives on the Broader Market
CICC pointed out that after four years, significant changes have occurred in global geopolitical and industrial landscapes, internal and external liquidity environments, and domestic credit cycles. The Hong Kong stock market has once again fallen to a cyclical low. Overall, the current Hong Kong market is more at a cyclical low. Valuations for some sectors and individual stocks are very low, and allocations by both domestic and foreign funds have returned to previous low levels. Some sentiment and buyback indicators are relatively extreme, but most indicators still show a gap compared to historical bottoms.
CICC also noted that allocations to Hong Kong stocks by both domestic and foreign funds have returned to the underweight levels seen before the period around September 24th. For example, active emerging market funds are currently overweight South Korea by over 4 percentage points while underweighting Chinese stocks by 1 percentage point. If the recent weakness in tech stocks continues, it could prompt some marginal rebalancing of funds.
Furthermore, the Hong Kong market will face a historically high peak in share lock-up expiries in the second half of the year, with July and September ranking first and second in terms of expiry size in Hong Kong's history. Historically, the overall scale of lock-up expiries has had a limited impact on the broader market trend, but the impact on individual stocks cannot be ignored, especially for stocks with a higher proportion of shares becoming unlocked.
New ETF Listings
The Eastmoney Construction Machinery ETF (159161.SZ) debuted today, closing down 0.7% at CNY 0.993 with a turnover of CNY 143 million. The fund tracks the CSI Construction Machinery Theme Index, which primarily covers companies in the construction machinery industry chain.
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