On July 21st, the hard tech theme staged a powerful comeback across A-shares and H-shares. While multiple semiconductor-focused ETFs on the A-share market surged by their daily limit, the Hong Kong market's hard tech sector was not to be outdone. The largest and most liquid ETF tracking this theme, the Hua Bao Hong Kong Stock Connect Information Technology ETF (159131), saw its on-exchange price rally strongly, closing up 6.35% on massive volume. Its turnover reached a record 4.5 billion yuan since listing, with net subscriptions for the day exceeding 200 million units.
Constituent stocks soared across the board. Zhipu AI surged over 36%, while Hua Hong Hongli Semiconductor Manufacturing Co., Ltd. and Montage Technology jumped more than 17%. Stocks including 51VR, GigaDevice Semiconductor, Kingboard Laminates Holdings, and TianShu ZhiXin gained over 10%. SMIC and Hua Hong Semiconductor rose more than 8%.
The core drivers behind this rally are likely fourfold. First, the global expansion trend is clear. TSMC raised its full-year 2026 capital expenditure forecast to $60-64 billion, with 70%-80% allocated to advanced processes. ASML significantly increased its full-year revenue guidance to €43-45 billion, citing strong demand for AI-related equipment. Samsung Electronics is evaluating doubling the initial production scale of its Taylor plant in the US.
Second, AI computing demand is exploding. Global semiconductor sales reached $120.61 billion in May 2026, doubling year-over-year. AI chip demand remains robust, and memory chips are experiencing structural tightness. JPMorgan expects the supply-demand tension for DRAM and NAND to persist into 2028.
Third, domestic substitution is accelerating. ChangXin Technology's IPO subscription on the STAR Market set a new record, with a lottery rate of just 0.4714%. China's National Integrated Circuit Industry Investment Funds I, II, and III have cumulatively raised over 650 billion yuan. The industrialization of domestic lithography machines is noticeably accelerating, giving upstream equipment and materials long-term scarcity value.
Fourth, a valuation repair window has opened. Following the recent pullback, risks in the hard tech sector have been significantly released, and the sector now offers attractive value for investment.
Notably, the fund manager for the Hua Bao Hong Kong Stock Connect Information Technology ETF (159131), Cao Xuchen, pointed out that despite recent market volatility, a potential computing power-driven rally is still anticipated in August-September. Key upcoming events to watch include the quarterly reports from Google, Microsoft, Meta, and Amazon between July 22nd and 30th, the US July non-farm payrolls and unemployment rate on August 7th, and Nvidia's earnings report on August 26th. In terms of investment direction, the optical modules focused on by the Hua Bao ChiNext Artificial Intelligence ETF (159363) and the FABs (foundries) focused on by the Hua Bao Hong Kong Stock Connect Information Technology ETF (159131) are currently relatively resilient and high-quality areas.
The Hua Bao Hong Kong Stock Connect Information Technology ETF (159131) offers a rare "pure-play" hard tech exposure in Hong Kong and supports T+0 trading. As the first and largest ETF of its kind with the strongest liquidity, its underlying index, the CSI Hong Kong Stock Connect Information Technology Composite Index, is composed of "85% hardware + 15% software." It heavily weights Hong Kong-listed "semiconductor + electronics + computer software" companies, covering 60 hard tech firms. The combined weight of the two major foundry giants, SMIC and Hua Hong Hongli Semiconductor Manufacturing Co., Ltd., exceeds 26%. The domestic AI PC leader, Lenovo Group, has a weight over 10%, and the PCB leaders, Kingboard Holdings and Kingboard Laminates Holdings, have a combined weight over 11%. These are the highest concentrations among all indices with linked products in the market. Furthermore, the index included several new Hong Kong hard tech stocks on June 15th, such as Zhipu AI. The index excludes large-cap internet companies like Alibaba, Tencent, and Meituan, offering higher concentration for capturing Hong Kong's AI hard tech trends.
Recent market volatility may be significant, and short-term gains or losses do not indicate future performance. Fund investments may incur losses. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position sizing and risk management.
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