Hong Kong stocks showed signs of stabilization on July 23, with major indices opening slightly higher and most leading internet companies rebounding. At the time of writing, TENCENT shares had turned positive, rising over 2%, with Meituan-W, Kuaishou-W, Alibaba-W, and Xiaomi Group-W also following the upward trend. The on-market price of HuaBao Hong Kong Internet ETF (513770), which holds significant positions in internet leaders, was up nearly 1%.
Just the previous day, TENCENT shares experienced a sudden plunge, plummeting 7% in a single session, which dragged the on-market price of the HuaBao Hong Kong Internet ETF (513770) down by more than 4%.
The primary cause for this sharp decline appears to be a piece of negative, unverified market speculation concerning TENCENT. Foreign media reports estimated that the company's domestic mobile game revenue for the second quarter fell by 2% year-over-year, leading market participants to anticipate a potential decline in its gaming segment.
This speculation was quickly refuted. A recent report from Citigroup pointed out that the market's pessimistic expectations for TENCENT's gaming revenue were based on a misinterpretation of tracking data. The core strength of TENCENT's gaming business lies in its diversified portfolio and ongoing global expansion strategy. The stable performance of its key game intellectual properties is sufficient to support steady growth in gaming revenue and profit on an annual basis, and fluctuations in quarterly revenue should not be overinterpreted as a trend reversal.
Citigroup further noted that the short-term decline in TENCENT's share price has created a more attractive buying opportunity, stating that market concerns over a potential slowdown in its second-quarter gaming revenue are overblown.
Funds have already begun actively accumulating positions via ETFs. Data from the Shanghai Stock Exchange shows that the HuaBao Hong Kong Internet ETF (513770) recorded a net inflow of 112 million yuan on the latest trading day, with total inflows over the past four consecutive days exceeding 365 million yuan.
The Hong Kong internet sector is currently undergoing a recovery from an oversold state, driven by improving fundamentals, valuation repair, and expectations for better liquidity conditions. On one hand, profitability indicators for leading internet companies are showing signs of a turning point. Negative factors, such as intense competition in food delivery, are showing marginal improvement, and the pressure for major internet firms to revise down profit expectations is easing. This is creating a positive cycle where investments in artificial intelligence (AI) translate into growth realization. On the other hand, the rebalancing of global capital and sustained inflows from southbound funds also provide support. Amid increased volatility in the hardware sector, global capital is seeking more cost-effective opportunities within the broader AI investment theme.
Analysts point out that the overall Hong Kong market is likely to exhibit a pattern of "bottom consolidation and gradual recovery" in the second half of the year. The market's focus is also expected to rotate, with capital likely shifting from the previously hot hardware and computing power sectors towards AI applications and the value re-rating of internet platforms.
Potential for Value Reassessment
Attention is turning to the potential value reassessment of leading Hong Kong-listed internet companies in light of 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. This index includes major tech giants like TENCENT and Alibaba-W, as well as AI application companies across various fields. The top six constituents account for nearly 70% of the index, highlighting its concentration in leading companies. The ETF also offers intraday T+0 trading with good liquidity.
Alternative Strategy for Hong Kong Tech
For investors bullish on Hong Kong technology but seeking to reduce volatility, the HuaBao Hong Kong Large Cap 30 ETF (520560) offers a different approach. As the first of its kind in the market, it employs a "tech + dividends" barbell strategy. Its portfolio includes high-growth tech stocks like Alibaba alongside stable, high-dividend-yielding stocks from sectors such as banking and insurance, making it a potential core holding for long-term Hong Kong market exposure.
Investors are reminded that recent market volatility may be elevated, and short-term price movements are not indicative of future performance. Investment decisions should be made rationally based on individual financial circumstances and risk tolerance, with careful attention paid to position sizing and risk management.
All data is sourced from exchanges including the Shanghai and Shenzhen Stock Exchanges. The base date for the CSI Hong Kong Stock Connect Internet Index is December 30, 2016, and it was officially launched on January 11, 2021. The index composition is adjusted according to its rules, and its past performance does not guarantee future results. The index's annual returns for the last five full years are: +27.02% (2025), +23.04% (2024), -24.74% (2023), -23.01% (2022), -36.61% (2021). Its annualized volatility for the same periods is: 33.60% (2025), 43.49% (2024), 32.09% (2023), 49.01% (2022), 38.72% (2021).
ETF fee information: When subscribing for or redeeming fund shares, subscription/redemption agents may charge a commission of up to 0.5%, which includes related fees charged by stock exchanges and registration institutions. Feeder fund fee information: For the HuaBao CSI Hong Kong Stock Connect Internet ETF Feeder Fund (Class A), the upfront subscription fee is 1% for subscriptions below 1 million yuan, 0.6% for subscriptions between 1 million and 2 million yuan, and a flat fee of 1,000 yuan for subscriptions of 2 million yuan or more. The redemption fee is 1.5% for holdings under 7 days and 0% for holdings of 7 days or more. No sales service fee is charged. For the HuaBao CSI Hong Kong Stock Connect Internet ETF Feeder Fund (Class C), no subscription fee is charged. The redemption fee is 1.5% for holdings under 7 days and 0% for holdings of 7 days or more. The sales service fee is 0.3% per annum.
Risk Disclosure: The HuaBao Hong Kong Internet ETF and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. The base date for this index is December 30, 2016, and it was launched on January 11, 2021. The index composition is adjusted according to its rules. Constituent stocks mentioned are for illustrative purposes only; individual stock descriptions are not investment advice and do not represent the holdings or trading intentions of the fund manager. The fund manager assesses this fund's risk level as R4 (Medium-High Risk), suitable for aggressive (C4) and above investors. Any information presented (including but not limited to stocks, commentary, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors are solely responsible for their investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind, and no liability is accepted for any direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee this fund's future performance. Past performance of the fund is not indicative of its future results. Fund investment carries risks, and caution is advised.
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