On October 21, Hong Kong stocks opened higher but pulled back, with the decline deepening in the afternoon session. The Hang Seng Tech Index fell below the 4,000 mark, sliding back to roughly the starting point of the "924" rally in 2024.
Internet leaders moved lower in line with the broader market. Alibaba Group Holding Ltd (HKEX: 9988), Baidu Inc (HKEX: 9888), and Meituan (HKEX: 3690) each dropped more than 1%, while Tencent Holdings Ltd (HKEX: 0700) fell more than 4%. The underlying index of the Hong Kong Internet ETF Huabao (SHSE: 513770) closed down 1.58%.
On the news front, SpaceX, owned by Elon Musk, released its latest quarterly results for the period ending September 2026, with revenue surging 161% year-on-year to US$14.58 billion and net profit reaching US$4.4 billion, both beating market expectations. Notably, SpaceX's AI revenue soared 830% year-on-year, becoming the company's largest source of revenue for the first time. The increase was mainly driven by new cloud service agreements, the Cursor acquisition, and growth in the Grok model and software applications, with this business resembling that of a cloud service provider.
In a recent research note, JPMorgan explicitly proposed that the center of gravity for AI profits will accelerate its migration from underlying hardware infrastructure toward higher value-added model and vertical application layers. JPMorgan forecasts that from 2026 to 2030, annual operating profit across China's AI value chain will jump from US$27 billion to US$243 billion, with the hardware profit share shrinking significantly, while software and models are expected to achieve explosive growth of 26.9 times.
Since October 2, 2025, the Hong Kong internet sector has been in a sustained correction for more than a year, with cumulative declines of over 47% during the period. The sector's current price-to-earnings ratio (PE-TTM) stands at just 20.08 times, placing it at the 8.31st percentile since the index's launch, fairly fully reflecting pessimistic market expectations, suggesting limited room for further downside. Chart: Performance of the Hong Kong Stock Connect Internet Index since September 24, 2024. Hong Kong AI focuses on cloud vendor leaders, large models, and application segments. Against the backdrop of continued profit realization in overseas large model and application segments, the Hong Kong internet sector is expected to benefit from sentiment spillover.
After deep declines in the earlier period, the sector may usher in strategic investment opportunities under the triple resonance of "fundamental expectations bottoming out + historically low valuations + AI commercialization realization." CITIC Securities believes that Hong Kong stocks' fundamental expectations have already bottomed, with profit growth for major indices beginning to be revised upward. As profit expectations for weighted industries stabilize and rebound, Hong Kong stocks have regained the foundation for a renewed upward trend, and valuation attractiveness is gradually emerging. *Guolian Minsheng Securities stated that AI trading is transitioning from broad valuation expansion into a phase of verification through earnings, orders, and return on investment. The medium-term trend of rising AI investment and inference demand has not reversed. It recommends focusing on platform-type internet companies with stable cash flow, clear AI commercialization paths, and ecosystem gateway advantages.
*The Hong Kong Internet ETF Huabao (513770) passively tracks the CSI Hong Kong Stock Connect Internet Index, heavily weighting internet leaders. Its top two holdings, Tencent Holdings Ltd (HKEX: 0700) and Alibaba Group Holding Ltd (HKEX: 9988), together account for more than 30% of the portfolio, while the top ten constituent stocks jointly represent over 80%, highlighting a significant leader advantage. It supports intraday T+0 trading and offers good liquidity. Off-exchange investors may consider the feeder funds (Class A 017125, Class C 017126).
Reminder: Recent market volatility may be significant, and short-term gains or losses do not predict future performance. Investors are advised to invest rationally based on their own financial situation and risk tolerance, and to pay close attention to position management and risk control. Data sources: Shanghai and Shenzhen Stock Exchanges, Wind, etc. Institutional views: CITIC Securities 261013 "Overseas Strategy | Return to Fundamentals"; Guolian Minsheng Securities 261018 "Hong Kong Stock Weekly: Model Iteration and Domestic Super Nodes Debut in Force, Continue to Be Bullish on Domestic AI." ETF fee-related notes: When investors subscribe to or redeem fund shares, the subscription and redemption agency may charge a commission of no more than 0.5%, which includes fees collected by the stock exchange, registration institution, and others. Feeder fund fee-related notes: The Huabao CSI Hong Kong Stock Connect Internet ETF Initiating Feeder Fund (Class A) has a subscription fee (front-end) of RMB 1,000 per transaction for subscription amounts above RMB 2 million, 0.6% for RMB 1 million (inclusive) to RMB 2 million, and 1% for amounts below RMB 1 million; the redemption fee is 1.5% for holding periods of less than 7 days and 0% for holding periods of 7 days (inclusive) or more; no sales service fee is charged. The Huabao CSI Hong Kong Stock Connect Internet ETF Initiating Feeder Fund (Class C) charges no subscription fee, with a redemption fee of 1.5% for holding periods of less than 7 days and 0% for holding periods of 7 days (inclusive) or more; the sales service fee is 0.3%.
Risk disclosure: The Hong Kong Internet ETF Huabao 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 CSI Hong Kong Stock Connect Internet Index's returns over the past 5 complete years were: 2025, 27.02%; 2024, 23.04%; 2023, -24.74%; 2022, -23.01%; 2021, -36.61%. Its volatility over the past 5 complete years was: 2025, 33.60%; 2024, 43.49%; 2023, 32.09%; 2022, 49.01%; 2021, 38.72%. The index's constituent stocks are adjusted in due course according to the index compilation rules, and its back-tested historical performance does not predict the index's future performance. The index constituent stocks mentioned in this article are for illustrative purposes only, and individual stock descriptions do not constitute investment advice in any form, nor do they represent the holdings or trading activities of any fund under the manager. The risk rating of this fund as assessed by the fund manager is R4 - Medium-High Risk, suitable for investors with an aggressive profile (C4) or above. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only, and investors must be responsible for any investment decisions they make independently. In addition, any views, analyses, and forecasts in this article do not constitute investment advice of any form to readers, nor shall they bear any responsibility for direct or indirect losses arising from the use of the content herein. The performance of other funds managed by the fund manager does not constitute a guarantee of the fund's performance. Past performance of a fund does not represent its future performance. Fund investment involves risk, and caution is required in fund investment. MACD golden cross signals have formed; these stocks are performing well!
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