To The Moon

On September 4th, Hong Kong stocks opened higher and strengthened, with leading internet companies collectively advancing. Meituan-W (03690.HK) climbed over 5%, Xiaomi Group-W (01810.HK) gained more than 3%, while Alibaba-W (09988.HK) and Tencent (00700.HK) both rose over 2%. The benchmark index tracked by the Hong Kong Internet ETF Huabao (513770) once advanced more than 4% intraday, eventually closing up 3.64%.

A synthesis of domestic and external signals points to three catalysts behind the renewed strength in Hong Kong's internet sector. Federal Reserve Governor Christopher Waller delivered a dovish tone, significantly cooling market expectations for a Fed rate hike in September. Meanwhile, all three major U.S. stock indices rallied overnight, providing a clear lift to Hong Kong markets. Additionally, U.S. cloud data platform Snowflake surged 55%, touching an intraday record high; its impressive revenue growth validates the commercial success of AI application deployment, creating a strong positive read-across for Hong Kong's internet complex.

With earnings seasons wrapping up, internet leaders including Alibaba, Tencent, and Meituan have demonstrated resilient core businesses. Their AI strategies are advancing on all fronts, with large model iterations and Agent commercialization accelerating. This positions them well for both earnings growth and valuation repairs. Kaiyuan Securities notes that the commercial window for AI applications is broadening. Office productivity AI products from major firms like Tencent continue to validate their business models, and consumer-facing Agent solutions are poised for breakthroughs. This could drive sustained high growth in domestic model Token/ARR metrics, while also speeding up Agent adoption across digital entertainment content production, enterprise office environments, and physical AI. AI application commercialization is expected to accelerate, in turn boosting demand for inference-side computing power. China Galaxy Securities believes the global AI valuation logic is shifting from hardware infrastructure toward application monetization. Sentiment around domestic large model commercialization is heating up, and attention should be directed toward AI application leaders, internet platforms with traffic entry points, and tech companies with sustained AI investment that could translate into earnings results.

Within the AI industry chain, value realization follows a distinct order. In the early phase, "shovel seller" segments—optical modules, co-packaged optics, storage, and AI chips—command premium valuations and strong gains due to supply scarcity and certain demand. Once technology matures and computing power is broadly deployed, the companies that truly deliver consumer-facing (To C) applications, generate stable cash flows, and amass real traffic become the core holdings worth focusing on over the medium to long term. As AI continues to develop and commercialization picks up pace, the Hong Kong internet sector is poised for strategic investment opportunities, driven by the twin engines of recovering earnings growth and valuation normalization.

The Hong Kong Internet ETF Huabao (513770) passively tracks the CSI Hong Kong Stock Connect Internet Index. Its heavyweight constituents include cloud giants like Alibaba-W and Tencent, along with various AI application companies. The top ten holdings collectively account for over 80% of the portfolio, underscoring a pronounced leadership tilt. The fund supports intraday T+0 trading and offers strong liquidity. For off-exchange investors, feeder funds are available (Class A: 017125, Class C: 017126).

Reminder: Recent market volatility may be elevated. Short-term gains or losses do not predict future performance. Investors are urged to invest rationally based on their own capital situation and risk tolerance, paying close attention to position sizing and risk management.

Data sources: Shanghai and Shenzhen stock exchanges, Wind, and others. Institutional perspectives sourced from Kaiyuan Securities (260901, "U.S. AI Application Companies Deliver Strong Earnings; Domestic Models Continue to Advance") and China Galaxy Securities (260828, "Overseas Giants Beat Expectations! Domestic Large Model Iteration Accelerates, Opening the Commercialization Window for AI Applications").

ETF fee note: When subscribing or redeeming fund shares, authorized participants may charge commissions at a rate not exceeding 0.5%, inclusive of fees charged by stock exchanges and registration institutions. Feeder fund fee details: For the Huabao CSI HK Stock Connect Internet ETF Feeder Fund (Class A), the subscription fee (front-end) is RMB 1,000 per transaction for subscription amounts above RMB 2 million, 0.6% for amounts between RMB 1 million (inclusive) and RMB 2 million, and 1% for amounts below RMB 1 million. The redemption fee is 1.5% for holding periods under 7 days and 0% for holding periods of 7 days (inclusive) or more. No sales service fee applies. For the Class C shares, no subscription fee is charged; the redemption fee is 1.5% for holding periods under 7 days and 0% for 7 days (inclusive) or more, with a sales service fee of 0.3%.

Risk disclosure: The Hong Kong Internet ETF Huabao and its feeder funds passively track the CSI HK Stock Connect Internet Index. The index base date is December 30, 2016, and it was published on January 11, 2021. Over the past five full calendar years, the index's annual returns were: 2025, 27.02%; 2024, 23.04%; 2023, -24.74%; 2022, -23.01%; 2021, -36.61%. The volatility for those years was: 2025, 33.60%; 2024, 43.49%; 2023, 32.09%; 2022, 49.01%; 2021, 38.72%. Index constituent stocks are adjusted according to the index methodology from time to time. Backtested historical performance is not indicative of future index returns. Index constituents shown in this document are for illustrative purposes only and do not constitute investment advice in any form, nor do they represent the holdings or trading activity of any fund under the manager's umbrella. The fund manager assesses the fund's risk level as R4 (medium-high risk), suitable for investors classified as aggressive (C4) or above. Any information presented here (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors are solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts herein do not constitute investment advice to readers of any kind, and no liability is assumed 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 the performance of this fund. Past performance does not represent future results. Fund investment carries risks; please invest carefully.