On Tuesday, July 2nd, the A-share and Hong Kong-listed chip and semiconductor sectors experienced a significant pullback. The largest and most liquid* Hong Kong Stock Connect Information Technology ETF (159131) saw its on-market price drop by 7.08%, attracting substantial inflows as investors bought the dip, with a net subscription of 12 million shares for the day.
Among its constituent stocks, several major holdings including Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Grace Semiconductor Manufacturing Corporation (HHGrace), Kingboard Laminates Holdings Ltd, ASMPT, and Kingboard Holdings Ltd all fell by over 10%. Lenovo Group Ltd dropped more than 4%, and Sunny Optical Technology (Group) Company Limited declined over 2%.
The catalyst for the sell-off was a Bloomberg report indicating that Meta Platforms is planning to expand into cloud infrastructure, offering its computing power and model access for sale to external parties.
Fund manager Cao Xuchen provided commentary, suggesting the market's concern is that Meta renting out computing power equates to scaling back on model development, leading to a potential computing power surplus and a downward revision in capital expenditure forecasts. For Meta, this move is seen as an asset optimization strategy to address concerns over high cash burn, potentially generating new revenue streams and improving resource allocation efficiency. Compared to other major tech firms, Meta lacks an existing cloud business, and its massive investments in AI infrastructure have a slow return cycle on its generative AI business, where its large language models are considered relatively less competitive. With a 2026 capital expenditure guidance of $135 billion, representing a near doubling in growth rate, expanding into cloud services could help smooth the return period on this capital outlay, similar to Elon Musk's XAI selling some of its computing capacity to Anthropic. Overall, the cloud infrastructure build-out by major providers over the next three years is largely anchored to demand from the three primary model developers (Google, Anthropic, OpenAI); the probability of Meta exiting the model race entirely is considered low. Meta's impact on future industry-wide capital expenditure is viewed as moderate, pending the stance of other major players, with attention turning to earnings reports at the end of July.
Regarding the broader industry trend, analysis from China Securities (CSC) points to a continued confirmation of the global semiconductor equipment upcycle. SEMI released a report on June 11th, significantly raising its 2026 global front-end semiconductor equipment market growth forecast from a previous 16.5% to 23.5%, reaching $152.2 billion. First-quarter global semiconductor equipment billings reached $36.55 billion, a year-on-year increase of 14%, setting a new historical quarterly record. Following SK Hynix's announcement earlier this month of a plan to double its capacity within five years, SK Group Chairman Choi Tae-won recently indicated in an interview that if all construction plans proceed as expected, Hynix's capacity could triple by 2034 compared to current levels. The global semiconductor equipment and components sector is experiencing a historically rare, across-the-board price increase wave. Pricing power within the semiconductor supply chain is structurally shifting from chip end-products towards the equipment and components segments.
Looking at performance over the past six months, a divergence has emerged within the Hong Kong technology sector. The underlying index for the Hong Kong Stock Connect Information Technology ETF—the CSI Hong Kong Stock Connect Information Technology Composite Index—has gained 30.85%, outperforming the Hang Seng Tech Index by approximately 50%, the Hong Kong Stock Connect Technology Index by about 45%, and the Hong Kong Stock Connect Internet Index by over 65%. Extending the view to the past three years, the CSI Hong Kong Stock Connect Information Technology Composite Index has surged more than 126%, outperforming the Hang Seng Tech Index by over 117%.
Statistical period: December 30, 2025 to June 30, 2026. The annual historical returns for the CSI Hong Kong Stock Connect Information Technology Composite Index from 2021 to 2025 were: -9.54%, -34.47%, -0.25%, 21.58%, and 39.30% respectively. Past index performance is not indicative of future results.
This ETF offers a rare, 'pure-play' exposure to Hong Kong-listed hard tech and supports T+0 trading. As the first, largest, and most liquid ETF of its kind tracking this index, its off-exchange feeder fund code is 026755. The underlying index is composed of approximately "80% hardware + 20% software," heavily weighted towards Hong Kong-listed "semiconductors + electronics + computer software" companies. It encompasses 60 Hong Kong hard tech firms, with the two major foundry giants, SMIC and Hua Hong Grace, collectively accounting for over 26% of the index weight. The domestic AI PC leader, Lenovo Group, holds a weight exceeding 10%, while the PCB leaders, Kingboard Holdings Ltd and Kingboard Laminates Holdings Ltd, together account for over 11% weight. These weightings represent the highest exposure among all market indices with linked products. Furthermore, the index's latest rebalancing on June 15th included several new Hong Kong hard tech entrants such as Zhipu AI, Biren Technology, and Shenghong Technology. The index's constituents exclude large-cap internet companies like Alibaba, Tencent, and Meituan, resulting in a sharper, more focused profile better positioned to capture the Hong Kong AI hard tech thematic trend.
Data sources: China Securities Index Co., Ltd., Shanghai and Shenzhen Stock Exchanges. (*Note: "First of its kind" refers to this ETF being the first in the market to track the CSI Hong Kong Stock Connect Information Technology Composite Index. As of June 26, 2026, the ETF's latest on-market scale was RMB 1.887 billion, making it the largest among the 8 ETFs tracking this index. Its year-to-date average daily turnover is RMB 659 million. The underlying CSI Hong Kong Stock Connect Information Technology Composite Index (HKD) had annual historical returns from 2021 to 2025 of: -9.54%, -34.47%, -0.25%, 21.58%, and 39.30% respectively. Past index performance is not indicative of future results. Fee note: Subscription and redemption agents for this ETF may charge a commission of up to 0.5%. On-market trading fees are subject to the rates set by securities firms. No sales service fee is charged. Reference for institutional viewpoint: China Securities (CSC) research report. Risk Disclosure: The Hong Kong Stock Connect Information Technology ETF and its feeder fund passively track the CSI Hong Kong Stock Connect Information Technology Composite Index. The index base date is November 14, 2014, and its release date is June 23, 2017. Constituent stocks mentioned are for illustrative purposes only; individual stock descriptions are not investment advice and do not represent the holdings or trading动向 of the fund manager. This product is issued and managed by China Universal Asset Management. Distributors do not bear investment or redemption liability for the product. Investors should carefully read the Fund Contract, Prospectus, Key Facts Statement, and other legal documents to understand the fund's risk-return profile and choose a product suitable for their own risk tolerance. Past fund performance does not predict future results. The performance of other funds managed by the manager does not guarantee this fund's performance. Fund investment involves risks. The fund manager assesses this fund's risk等级 as R4 (Medium-High Risk), suitable for Aggressive (C4) and above investors. Distributors provide their own risk assessments according to regulations; investors should pay attention to the distributor's suitability opinion, with the matching result being final. Suitability opinions may vary among distributors, and a distributor's risk rating cannot be lower than the manager's rating. The fund's risk-return characteristics in the contract and its risk等级 may differ due to different assessment factors. Investors should understand the fund's risks and returns,结合自身 investment objectives, horizon, experience, and risk tolerance to choose基金 products and bear the risks independently. CSRC registration of this fund does not indicate a judgment or guarantee of its investment value, market prospects, or returns. Funds carry risks; investment requires caution.)
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