To The Moon

Southbound funds recorded a net purchase of 11.031 billion Hong Kong dollars on August 3rd, according to data. The Shanghai-Hong Kong Stock Connect saw a net buy of 6.428 billion yuan, while the Shenzhen-Hong Kong Stock Connect recorded a net inflow of 4.603 billion yuan.

The three largest net buying targets were Tracker Fund of Hong Kong (02800), Alibaba-W (09988), and Tencent Holdings Ltd. (00700). On the selling side, the most significant net outflows were seen in Semiconductor Manufacturing International Corporation (00981), Hua Hong Grace Semiconductor Limited (01347), and Kingboard Laminates Holdings Ltd (01888).

Initial observations on key holdings

Tracker Fund of Hong Kong (02800) and CSOP Hang Seng Tech Index ETF (03033) saw net purchases of 4.749 billion and 317 million Hong Kong dollars, respectively. Analysts at BOCOM International note that both the Hang Seng Index and Hang Seng Tech Index rebounded in July after a June correction, supported by improved liquidity, valuation recovery, and earnings growth. They suggest a barbell strategy for asset allocation, with one end focused on high-growth technology stocks and the other on beneficiaries of reflation and companies with strong cash flows.

Alibaba-W (09988) attracted a net buy of 4.168 billion Hong Kong dollars. The company recently unveiled its Qwen 3.8-Max model, its largest and most powerful open-source model to date, with 2.4 trillion total parameters and 95 billion activated parameters. Benchmark tests indicate its programming and general agent capabilities are comparable to Anthropic's Fable5, surpassing it in some areas, while demonstrating autonomous execution abilities in long-duration tasks like chip design, quantitative research, and e-commerce simulation.

Tencent Holdings Ltd. (00700) received a net inflow of 2.432 billion Hong Kong dollars. Huayuan Securities highlights Tencent's strong long-term ecosystem moat. With a new AI investment cycle narrative, its Hunyuan series of models appears to have kept pace with major domestic players, and products like WorkBuddy and WeChat AI Agent are proving viable in both B2B and B2C applications.

Xiaomi-W (01810) saw a net purchase of 293 million Hong Kong dollars. Following the recent launch of its second car model series, the Xiaomi Pengcheng, which complements the SU7 and YU7 lines, two models are expected to debut in September. CICC Research forecasts robust sales growth for Xiaomi's automotive segment in the third quarter, driven by SU7, YU7, and the Pengcheng series, alongside improving profitability.

GigaDevice Semiconductor Inc. (03986) faced a net sell-off of 173 million Hong Kong dollars. Despite Chairman Zhu Yiming pledging not to reduce his holdings for the next 12 months and proposing a share buyback worth 1-2 billion yuan, a plan to sell shares worth 4.4 billion yuan between May and June 2026 was also disclosed.

Semiconductor Manufacturing International Corporation (00981) and Hua Hong Grace Semiconductor Limited (01347) experienced net outflows of 1.063 billion and 402 million Hong Kong dollars, respectively. BOC International rates the sector as TSMC > Hua Hong Grace > SMIC. Hua Hong is favored for its higher exposure to AI power analog, better profit expansion trajectory, and potential value from the Hua Li Micro asset injection, while SMIC has been downgraded to "hold" due to more moderate growth and a heavier balance sheet from capacity expansion and M&A.

Additionally, Meituan-W (03690) recorded a net buy of 580 million Hong Kong dollars, while Yangtze Optical Fibre and Cable Joint Stock Limited (06869) and Kingboard Laminates Holdings Ltd (01888) saw net outflows of 33.24 million and 310 million Hong Kong dollars, respectively.