The Hong Kong-listed 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 stocks, rose for five consecutive trading days. Its on-exchange price gained over 1% again today (July 10th), marking a second consecutive weekly gain from recent lows. As a leading performer, Alibaba-W rose another 2%, bringing its total gain to over 23% since the rally began on June 29th. Xiaomi Group-W climbed over 3%, with Bilibili-W and Meituan-W also advancing.
Concurrently, fund flows have shown notable activity. The ETF (513770) saw a reversal in its capital flows over the past two days, attracting over 287 million yuan in net inflows. It traded at a persistent and significant premium during today's session, indicating strong buying interest and suggesting the accumulation trend may continue.
Key Drivers Behind the Rebound
Industry insiders point to a confluence of three key drivers: the implementation of supportive policies, a shift in global capital allocation styles, and historically low sector valuations. This has significantly increased investor willingness to gain exposure to Hong Kong's internet leaders via ETFs. With recent heightened volatility in AI hardware stocks, some capital is rotating into Hong Kong internet companies seeking undervalued opportunities. Feng Chencheng, the fund manager of the Huabao Hong Kong Internet ETF (513770), noted that style preferences within the tech sector are shifting from growth leaders to leading value stocks.
Industry Catalysts and Policy Support
Secondly, a cluster of industry catalysts is emerging. Alibaba's preliminary results for the first quarter of its 2027 fiscal year exceeded expectations across the board. Loss reduction at its flash sales platform Taobao Deals was faster than market forecasts, and revenue growth at Alibaba Cloud accelerated to around 45%. The market is refocusing on Alibaba's AI assets and growth logic. Tencent officially launched its Hunyuan Hy3 model. Kuaishou's Kling AI completed an external funding round with an upper limit of $3 billion, setting a global record. Meituan open-sourced its new-generation trillion-parameter large language model, LongCat-2.0.
Furthermore, positive news has emerged from the policy front. In a speech at the "Hong Kong Fixed Income and Currency Summit and Bond Connect Forum," the central bank governor stated that support will continue for high-quality companies to list and issue bonds in Hong Kong, and channels for cross-market connectivity in equities, bonds, wealth management products, and derivatives will be broadened to deepen financial cooperation in the Greater Bay Area. Additionally, the national foreign exchange reserves are expected to further increase their allocation to Hong Kong stocks, stabilizing market development expectations from both a top-level policy and long-term cross-border capital perspective.
Valuation Outlook and Investment Vehicles
Analysis from Everbright Securities suggests that, considering the current rebound, valuations for large internet companies remain attractive. For instance, the forward price-to-earnings ratios for Tencent and Alibaba are only around 16 times, comparable to consumer stock levels. If the AI contribution to these internet leaders' businesses continues to grow, the market may assign higher valuations, leaving significant room for further upward re-rating.
Investors are focusing on the potential value re-rating of Hong Kong internet leaders amid 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 Alibaba-W and Tencent Holdings, as well as AI application companies across various sectors, offering significant leading advantages, T+0 trading, and good liquidity.
Alternative Strategy for Lower Volatility
For those bullish on Hong Kong tech but seeking to reduce volatility, the first-of-its-kind Huabao Hong Kong Large Cap 30 ETF (520560) could be considered. It employs a "tech + dividends" barbell strategy, holding both high-beta tech stocks like Alibaba and stable, high-dividend payers like 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 significant, and short-term gains or losses do not predict future performance. It is crucial to invest rationally based on individual financial circumstances and risk tolerance, paying close attention to position sizing and risk management.
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