To The Moon

South Korean investors are making waves, pouring over $5.4 billion into Mainland China and Hong Kong stock markets in 2025, fueling a historic rally in the Hang Seng Index (HSI), which smashed through 25,000 to reach 26,500, a 55.6% year-to-date (YTD) gain. Top net-bought stocks like Xiaomi, BYD Co., CATL, Alibaba, Laopo Gold, and Pop Mart are riding this wave, driven by optimism about China’s economic recovery and undervalued assets. As U.S. tech stocks face sell-offs amid high valuations, investors are eyeing Chinese tech and consumer stocks for value and growth. But is this rally sustainable, or are risks like trade tensions and economic slowdowns looming? This report dives into the Korean investment surge, the HSI’s breakout, top stock picks, and strategic investment approaches to capitalize on this momentum while managing risks.

The Hang Seng’s Historic Surge

The Hang Seng Index, a benchmark for Hong Kong’s stock market, has soared past 25,000, hitting 26,500 in July 2025, its highest since August 2014. Key drivers include:

• Economic Optimism: China’s PMI showed growth for two consecutive months, signaling resilience despite a projected 4.5% GDP growth in 2025, per Refinitiv.

• Strong Earnings: Companies like Xiaomi (Q1 2025 revenue up 27% to $10.5 billion) and BYD (Q1 sales up 20% to $17 billion) have delivered robust results, boosting investor confidence.

• Korean Investment: South Korean retail investors’ $5.4 billion influx, per Korea Securities Depository (KSD), reflects growing faith in Chinese tech, EVs, and consumer sectors.

• Valuation Appeal: The HSI’s forward P/E of 9.5x, below its 10-year average of 11x, contrasts with the S&P 500’s 22x, making it a “value play,” per Bloomberg.

Social media sentiment on X is bullish, with users noting “HSI’s 25,000 break is a game-changer” and “Korean money is betting big on China,” though some warn of “trade war risks.”

Korean Investors’ Top Picks

South Korean retail investors have targeted high-growth Hong Kong-listed stocks, reflecting confidence in China’s tech and consumer sectors:

• Xiaomi (1810): Up 249.94% YTD, driven by 27% Q1 revenue growth and AI/IoT expansion. Targets HK$28, with support at HK$20.

• BYD Co. (1211): Up 33% YTD, with record EV sales and battery tech leadership. Targets HK$300, with support at HK$240.

• CATL (300750): Up 20% YTD, fueled by global EV battery demand. Targets HK$220, with support at HK$180.

• Alibaba (9988): Up 15% YTD, with cloud and e-commerce growth. Targets HK$90, with support at HK$75.

• Laopo Gold (6189): Up 30% YTD, driven by luxury retail and gold demand. Targets HK$120, with support at HK$90.

• Pop Mart (9992): Up 25% YTD, tapping China’s youth market. Targets HK$50, with support at HK$40.

Are Chinese Assets Taking Off?

Bullish Drivers

• Valuation Advantage: Chinese tech stocks like Xiaomi (P/E 15x) and Alibaba (P/E 12x) trade at discounts compared to U.S. peers like NVIDIA (32x) and Microsoft (30x), offering value.

• Economic Recovery: China’s PMI growth and retail sales improvements signal a turnaround, with the HSI’s 55.6% YTD gain outpacing the S&P 500’s 28%.

• Korean Capital: The $5.4 billion influx from Korean investors, per KSD, reflects growing global confidence in Chinese assets, particularly tech and EVs.

• Policy Support: China’s monetary easing and stimulus measures, including lower interest rates, support market growth, per Bloomberg.

Bearish Risks

• Trade Tensions: Trump’s tariffs (30% on EU/Mexico, 35% on Canada, effective August 1) and potential U.S.-China trade escalations could disrupt exports, impacting companies like Xiaomi and BYD.

• Economic Slowdown: Refinitiv’s 4.5% GDP growth forecast for 2025, down from 4.8% in 2024, suggests uneven recovery, with deflationary risks lingering.

• Regulatory Uncertainty: China’s past crackdowns on tech firms (e.g., Alibaba’s 2021 fine) could resurface, capping upside.

• Geopolitical Tensions: The Israel-Iran conflict (oil at $75/barrel) and U.S.-China frictions could pressure global markets, with a potential 5-10% S&P 500 pullback to 5,800-6,000 affecting the HSI.

The HSI’s breakout suggests Chinese assets are gaining traction, but risks require careful navigation.

Should You Buy Chinese Tech Stocks?

As U.S. tech stocks face sell-offs—NVIDIA down 4% and the “Magnificent Seven” group 12% below its December 2024 high, per CNBC—Chinese tech stocks offer a compelling alternative:

• Value Play: Lower P/E ratios (Xiaomi 15x, Alibaba 12x vs. NVIDIA 32x) make Chinese tech stocks attractive for value investors.

• Growth Potential: Xiaomi’s AI/IoT and BYD’s EV dominance align with global trends, with analysts forecasting 20-30% upside for both.

• Diversification: Allocating 10-20% of a portfolio to Chinese tech stocks reduces reliance on U.S. tech, balancing risk in a volatile market.

However, investors should diversify across sectors and hedge against trade and geopolitical risks to mitigate potential downturns.

Trading and Investment Strategies

Short-Term Plays

• Buy Xiaomi on Dip: Enter at HK$20-$22, target HK$28-$30, stop at HK$18. A 20-30% gain if tech momentum continues.

• Buy BYD on Dip: Grab at HK$240-$250, target HK$300-$320, stop at HK$220. A 20-28% gain on EV demand.

• Options Straddle: Buy HK$22 calls/puts on Xiaomi or HK$250 calls/puts on BYD for earnings volatility.

• Sector Hedge: Buy Hang Seng Tech Index ETF (2837.HK) at HK$5, target HK$6, stop at HK$4.50, for broad exposure.

Long-Term Investments

• Hold Xiaomi: Buy at HK$20-$22, target HK$35-$40 by 2026, for 59-82% upside with AI/IoT growth.

• Hold BYD: Buy at HK$240-$250, target HK$350-$400, for 40-60% upside with EV and battery expansion.

• Hold Alibaba: Buy at HK$75-$80, target HK$100-$120, for 25-50% upside with cloud and e-commerce growth.

• Diversify with Tech ETF (XLK): Buy at $200, target $220, stop at $190, for U.S. tech exposure.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge against tariff or market volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously bullish on Chinese tech stocks, seeing 20-30% upside for Xiaomi and BYD by year-end 2025 if the HSI’s rally continues. I’ll buy Xiaomi at HK$20-$22, targeting HK$28-$30, with a HK$18 stop, and BYD at HK$240-$250, targeting HK$300-$320, with a HK$220 stop. For diversification, I’ll add 2837.HK at HK$5, targeting HK$6, with a HK$4.50 stop. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash to seize dips if tariffs (30% on EU/Mexico, 35% on Canada) or geopolitical tensions (Israel-Iran conflict) escalate. I’ll monitor Q2 earnings, trade policy updates, and China’s PMI for cues.

Key Metrics

The Bigger Picture

The Hang Seng Index’s surge past 25,000, fueled by $5.4 billion in Korean investment and strong earnings from Xiaomi, BYD, and Alibaba, signals a potential turnaround for Chinese assets. With a 55.6% YTD gain, the HSI outperforms the S&P 500’s 28%, offering value at a 9.5x P/E compared to U.S. tech’s 30x+. As U.S. tech stocks face sell-offs, Chinese tech and consumer stocks like Xiaomi and BYD provide growth and diversification opportunities. However, trade tensions, China’s 4.5% GDP growth forecast, and geopolitical risks pose challenges. Investors should buy on dips, diversify across sectors, and hedge with VIXY or GLD to manage risks. The Chinese market is heating up—play it smart to win big.

Are you jumping into Chinese tech stocks like Xiaomi or BYD? How are you playing the HSI rally? Share your strategy below! 🎁