The Hong Kong internet sector has staged a rebound over the past two weeks. From July 2nd to July 8th, the Huabao Hong Kong Internet ETF (513770), which is heavily weighted in leading internet companies, rose for five consecutive days. It fell slightly by 0.28% yesterday after an intraday pullback but gained over 1% in on-exchange price today, marking a second consecutive weekly gain from recent lows.
As a recent frontrunner, BABA-W rose another 2%, bringing its total gain to over 23% since the rally began on June 29th. Xiaomi Group-W surged more than 3%, with Bilibili-W and Meituan-W also advancing.
Concurrently, capital flows have shown notable activity. ETF 513770 saw net inflows exceeding 287 million yuan over the past two days, reversing previous trends. It traded at a persistent and wide premium today, indicating strong buying interest and suggesting the accumulation trend may continue.
Key Drivers Behind the Move
Industry insiders point to a confluence of three factors boosting capital allocation into Hong Kong internet leaders via ETFs: the implementation of policy tailwinds, a global shift in capital style, and historically low sector valuations. With recent heightened volatility in AI hardware, some capital is rotating into Hong Kong internet companies seeking value opportunities. Feng Chencheng, the fund manager of Huabao Hong Kong Internet ETF (513770), noted that style preference within the tech sector is shifting from pure growth leaders to established value plays.
Industry Catalysts in Focus
Secondly, a cluster of industry catalysts is emerging. Alibaba's preliminary results for Q1 FY2027 comprehensively exceeded expectations, with Taobao Flash Sales reducing losses faster than anticipated and Alibaba Cloud revenue growth accelerating to around 45%. The market is refocusing on Alibaba's AI assets and growth narrative. TENCENT officially launched its Hunyuan Hy3 model. Kuaishou's Keling AI completed an external funding round of up to $3 billion, setting a global record. Meituan open-sourced its new-generation trillion-parameter large model, LongCat-2.0.
Supportive Policy Signals
Additionally, positive policy news has emerged. The central bank governor, speaking at the "Hong Kong Fixed Income & Currency Summit and Bond Connect Forum," stated that support for high-quality companies listing and issuing bonds in Hong Kong will continue, with efforts to broaden connectivity channels for stocks, bonds, wealth management products, and derivatives between the two markets, deepening financial cooperation in the Greater Bay Area. Furthermore, the national foreign exchange reserves are expected to further increase their allocation to Hong Kong stocks, stabilizing market expectations from both a top-level policy and long-term cross-border capital perspective.
Everbright Securities noted that despite the recent rebound, valuations of large internet companies remain attractive. For instance, TENCENT and Alibaba are trading at forward P/E ratios of around 16x, comparable to consumer stock levels. If the AI contribution of these internet leaders continues to grow, the market may award them higher valuations, leaving significant room for upward re-rating.
Potential for Value Reassessment
Investors are watching the potential value reassessment of Hong Kong internet leaders amid the AI transformation. The Huabao Hong Kong Internet ETF (513770) and its feeder funds (Class A: 017125; Class C: 017126) passively track the CSI Hong Kong Stock Connect Internet Index. Its top ten holdings aggregate tech giants like BABA-W and TENCENT Holdings alongside AI application companies across various sectors, offering significant leadership advantages. The ETF offers intraday T+0 trading with good liquidity.
For those bullish on Hong Kong tech but seeking to mitigate volatility, the market's first Hong Kong Large Cap 30 ETF (520560) offers a "tech + dividend" barbell strategy. Its portfolio includes high-beta tech stocks like Alibaba alongside stable, high-dividend banks and insurers, making it an ideal core holding for long-term Hong Kong market allocation.
Investors are reminded that recent market volatility may be elevated, and short-term performance is not indicative of future results. Investment decisions should be made rationally based on individual financial circumstances and risk tolerance, with careful attention to position sizing and risk management.
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