Alibaba Slumps Over 6% After Earnings Miss, Is AI Potential Undervalued? Huabao Fund's HK Internet ETF Hits New Low, When Will It Stabilize?

On March 20th, Hong Kong's three major stock indices closed lower collectively, with leading technology stocks experiencing significant declines. BABA-W fell over 6% following its earnings report, as its fiscal third-quarter revenue and profit fell short of expectations. TENCENT, which had dropped over 6% the previous day, declined nearly 1% further. Xiaomi Group-W saw a decline of over 8%. The Hong Kong Internet ETF (513770), a core tool for accessing Hong Kong's AI and internet sector, opened lower and continued to fall, closing down 3.74% and hitting a new low for this adjustment cycle.

The market pullback is attributed to two main factors. Firstly, geopolitical conflicts are suppressing risk appetite, prompting investors to shift towards defensive assets. Secondly, the earnings reports from heavyweight leaders TENCENT and BABA-W have reignited market concerns that their substantial investments in AI are squeezing profit margins.

Despite the current weakness, institutional outlook remains optimistic. Everbright Securities stated that the Hong Kong technology sector has entered a strategic allocation period characterized by both high probability of success and high potential returns. The trio of bottoming signals—oversold valuations forming a value洼地, contrarian capital inflows, and an improving fundamental trend—are becoming increasingly clear, potentially creating a rare "golden window for strategic positioning."

Galaxy Securities also noted that while short-term market sentiment may continue to digest disturbances, the medium to long-term supportive factors remain unchanged. In terms of allocation, the technology sector is still considered a primary long-term investment theme. The current concerns surrounding AI may, in fact, be creating buying opportunities, and the rise of China's AI capabilities is expected to bolster market confidence.

Regarding future sector opportunities, the surge in "token usage volume" is driving up cloud product prices, indicating that leading internet companies possess stronger commercial realization capabilities during the AI cycle. The current valuation of the Hong Kong internet sector, with a trailing P/E ratio of only 22 times, sits near the 10th percentile of its 5-year range, representing a historical low. This valuation is significantly lower than that of US and A-share tech stocks, highlighting a substantial margin of safety.

To position for the anticipated commercialization of AI in 2026, investors may consider core Hong Kong AI tools. The Hong Kong Internet ETF (513770) and its feeder funds track the CSI Hong Kong Stock Connect Internet Index. Its top ten holdings aggregate tech giants like BABA-W, TENCENT, Xiaomi Group-W, Kuaishou-W, and Bilibili-W, along with AI application companies across various sectors, offering significant龙头 advantage. The ETF also features T+0 trading and good liquidity.

For investors bullish on Hong Kong tech but seeking to reduce volatility, the Hong Kong Large Cap 30 ETF (520560) presents an alternative. It employs a "tech + dividends" barbell strategy, holding both high-growth tech stocks like Alibaba and TENCENT, as well as stable, high-dividend stocks like China Construction Bank and Ping An Insurance, making it an ideal core holding for long-term Hong Kong market exposure.

Investors are reminded that recent market volatility may be high, and short-term price movements are not indicative of future performance. It is crucial to invest rationally based on individual financial circumstances and risk tolerance, with strict attention to position sizing and risk management.