The Hong Kong stock market saw a mild adjustment today, with the technology sector experiencing a slight rebound. ETFs tracking South Korean indices led the declines, while semiconductor equipment ETFs surged during the late trading session. At the close, the Hang Seng Index rose 0.48% to 25,797.85 points, with a full-day turnover of HKD 272.166 billion. The Hang Seng Tech Index gained 0.26%, closing at 4,857.46 points.
Ranked by size, the top three Hong Kong-related ETFs performed as follows: Tracker Fund (02800) closed up 0.62% at HKD 25.98; CSOP Hang Seng China Enterprises Index Daily (2x) Leveraged Product (02828) rose 0.57% to HKD 88.72.
**Sector Performance** 1. The Korea Composite Stock Price Index (KOSPI) and KOSPI 200 Index continued to decline, with related South Korea-tracking ETFs leading the losses. By the close, CSOP Hang Seng China Enterprises Index Daily (2x) Leveraged Product (02828) fell 10.38% to HKD 81.14. Former President of Samsung Electronics' semiconductor division, Kyung Kye-hyun, issued a public warning, forecasting that global memory production capacity is expected to surge to a massive 600 million wafers per month by the second half of next year. This proactive surge in supply is projected to trigger a profound reversal in the overall semiconductor cycle no later than the first half of 2028. A longer-term risk lies in the potential for a phase of investment contraction if capital expenditure returns in the AI sector from tech giants like Amazon, Microsoft, and Google fall short of expectations. This could lead not only to significant price declines but also to an actual contraction in global demand for memory chips post-2028. Influenced by this news and coupled with the U.S. 10-year Treasury yield climbing above 4.5%, foreign capital continued to flow out of the South Korean market. The KOSPI index fell over 4% intraday, dropping below the 7,200-point level, marking a decline of more than 10% from the record high set last week.
2. The STAR 50 Index bottomed out and recovered. The semiconductor equipment industry may be entering a new AI-driven expansion cycle, leading to a late-session rally in related ETFs. At the close, Semiconductor Equipment ETF (561980) surged 6.06% to CNY 3.185; E Fund Semiconductor Equipment ETF (159558) rose 5.31% to CNY 2.977; Huatai-PineBridge Semiconductor Equipment ETF (588710) gained 5.02%, closing at CNY 2.638. Huatai Securities noted that with the current expansion of wafer fabs and memory companies, alongside advancements in chips towards new memory technologies, advanced processes, and advanced packaging, the global semiconductor materials market is poised for rapid growth. Currently, the overall localization rate of semiconductor materials in China remains relatively low. However, with increasing requirements for independent control and improved product competitiveness of domestic companies, the localization rate is expected to rise. China Merchants Securities emphasized that the diffusion of AI computing power demand is driving an uptick in sentiment across the semiconductor industry chain. The clear trend of domestic memory capacity expansion is pushing equipment and material orders to continue improving. Concurrently, against the backdrop of an accelerating localization rate, the semiconductor materials and electronic chemicals sectors are demonstrating strong earnings elasticity, catalyzed by factors such as memory expansion and product price increases.
**Institutional Views** East Money Fund's view suggests that the current global semiconductor industry's sentiment is continuously rising, potentially entering a new upward cycle. The core driver of this market trend stems from the expansion of the AI computing power industry. Chips, as the core hardware of computing infrastructure, are deeply integrated and co-developing with the AI and server industry chains. Coupled with factors such as low global inventory levels, continuous price adjustments along the supply chain, and ongoing improvement in industry fundamentals, the investment value of the sector is becoming increasingly prominent. Guotai Haitong indicated that short-term risk factors like rising interest rates bring negative pricing disturbances, but the medium-term focus remains on the growth trend of the AI industry. The key for the Hong Kong stock market to break through in the next stage lies in confirming a fundamental inflection point. The Q1 2026 financial reports of internet companies have solidified the narrative of a fundamental reversal. In terms of allocation, it is advisable to value the defensive role of Hong Kong dividend stocks, which have medium-term incremental fund support, can withstand short-term geopolitical shocks, and benefit from institutional buying during the rights issue period.
**ETF Developments** N Food ETF Qianhai Kaiyuan (560420) debuted today, closing up 0.21% at CNY 0.972, with a turnover of CNY 41.9316 million. It tracks the CSI All Share Food Index, covering the food and beverage industry.
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