Hong Kong stocks reversed early losses to close higher on Wednesday, with all three major indexes turning positive in late trading. Leading companies in the innovation drug sector reported quarterly results that exceeded expectations and raised their outlooks, while the benefits from overseas expansion are increasingly materializing, driving a broad rally in innovation drug ETFs. Meanwhile, expectations for a Federal Reserve interest rate cut have weakened significantly, and central banks globally are continuing to boost their gold reserves, supporting a continued upward trend in gold ETFs.
The Hang Seng Index ended the session up 0.54% at 25,668.03 points, with total turnover reaching HKD 259.686 billion. The Hang Seng Tech Index rose 0.78% to close at 4,858.29 points.
Among the most actively traded Hong Kong ETFs by scale, the Tracker Fund of Hong Kong (02800) gained 0.62% to HKD 26.16. The CSOP Hang Seng Tech Index ETF (03033) added 0.68% to HKD 4.766. The Hang Seng China Enterprises Index ETF (02828) edged up 0.5% to HKD 87.98.
Sector Highlights
Leading innovation drug firms reported better-than-expected interim results and raised their earnings guidance, with overseas expansion benefits coming into full play, prompting a strong rally in innovation drug ETFs. By the close, the E Fund Innovation Drug ETF (516080.SH) surged 7.06% to RMB 0.728. The Wanjia HK Stock Connect Innovation Drug ETF (520700.SH) jumped 6.58% to RMB 1.571. The Yinhua Innovation Drug ETF (159992.SZ) advanced 6.56% to RMB 0.910. Key players like WuXi AppTec (02359) and BeiGene (06160) delivered results that beat forecasts and raised their guidance. This was amplified by a growing narrative around AI-driven drug development providing a "three-layer expansion" for the pharmaceutical industry. According to CSC, the domestic CXO sector, after adjustments from 2022 to 2024, is now seeing a recovery in overseas orders. This is coupled with active out-licensing of domestic innovative drug assets and a rebound in financing. The firm predicts accelerated growth in new contracts and earnings for domestic CRO/CDMO firms by 2026. Additionally, the National Medical Products Administration sought public feedback in July on optimizing the review and approval process for cell and gene therapy drugs, further strengthening market expectations for improved R&D efficiency in the CGT sector. Sinolink Securities stated that the inflection point for profitability in innovative drug companies is near, with a dense calendar of clinical data catalysts throughout the year and promising overseas clinical progress for already out-licensed pipelines. The brokerage is bullish on the sector's investment opportunities. Its specific strategy focuses on: 1) navigating the earnings season to identify companies beating estimates; 2) monitoring academic conference updates for major clinical data releases; and 3) concentrating on core segments like small nucleic acids, bispecific antibodies, and ADCs to capture value during the commercialization phase.
Expectations for a US interest rate cut have diminished significantly, and global central banks continue to increase their gold holdings, driving gold ETFs to extend their gains. By the close, the YonGold Gold Stock ETF (517520.SH) rose 3.99% to RMB 2.112. The Cathay Gold Stock ETF (517400.SH) increased 3.3% to RMB 1.658. The China Asset Management Gold Stock ETF (159562.SZ) climbed 3.2% to RMB 2.289. Spot gold broke through the $4,300 per ounce mark this week, hitting a seven-week high, supported by ongoing central bank purchases and reduced expectations for a US rate hike. The US July ADP private sector employment report showed an increase of only 44,000 jobs, significantly below the market consensus of 70,000 to 75,000, and June's data was also revised downward, clearly signaling a cooling labor market. Following the data release, US Treasury yields and the US dollar weakened simultaneously, boosting gold prices from a valuation perspective. Sinolink Securities believes the weak ADP data has led to a sharp market re-evaluation of rate hike expectations, opening a window for a "Davis double play" in gold prices through valuation recovery and earnings improvement. This is driving both volume and price increases for gold resource stocks. The brokerage added that the resumption of global central bank gold purchases, the weakening of the US dollar-centric credit system, and the persistence of deglobalization trends form a solid medium to long-term floor for gold prices. Previously, precious metals were pressured by oil price spikes from the US-Iran conflict and periodic hawkish expectations, causing gold to pull back from highs to around $4,000. However, the period of tightest liquidity has passed. As subsequent data like CPI continue to decline, the macro constraints on valuations are gradually being lifted.
Institutional Views
Western Securities believes the global AI narrative is shifting its focus to China and recommends a strategic overweight on Hong Kong-listed internet stocks. The firm had previously noted that there was little room for the US dollar index to fall in May-June, suggesting a potential "last dip" for Hong Kong stocks. It now judges that the US dollar index is more likely to fall than rise, creating a basis for a strategic long position in Hong Kong stocks. Furthermore, the global AI narrative is transitioning from the North American supply chain to the Chinese supply chain and from the hardware sector to the application sector. This is expected to unlock upside for Hong Kong internet companies. The reasoning includes: the earnings momentum of China's AI chain is beginning to catch up with the North American chain; the global AI narrative focus is shifting from hardware to applications; and the previously crowded long positions in AI hardware stocks are likely to rotate towards attractively valued Hong Kong internet stocks.
ETF Movers
The Bosera Chemical Industry ETF (158006.SZ) made its trading debut, closing 0.97% higher at RMB 1.046 with a turnover of RMB 156 million. The fund tracks the CSI Sub-Industry Chemical Theme Index, focusing on cyclical resource sectors and investing in leading companies in basic chemicals, petrochemicals, and chemical raw materials and products.
The E Fund A-Share ETF (561890.SH) also began trading, finishing up 0.99% at RMB 1.02 on a turnover of RMB 198 million. The fund tracks the CSI A-Share Index, with top holdings including industry leaders like Contemporary Amperex Technology and Zhongji Innolight.
The Huatai-PineBridge Medical Device ETF (561810.SH) debuted with a 2.01% gain, closing at RMB 1.015. Turnover reached RMB 89.99 million. The fund tracks the CSI All Share Medical Devices Index, covering three core areas of the medical device industry chain: medical equipment, medical consumables, and in-vitro diagnostics.
The Huaan Engineering Machinery ETF (512420.SH) began trading and closed flat at RMB 1.00. Turnover was RMB 76.05 million. The fund tracks the CSI Engineering Machinery Theme Index, covering core engineering machinery products such as excavators, cranes, forklifts, and hydraulic components.
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