On November 21, Hong Kong stocks extended their decline amid overnight U.S. market volatility, with the Hang Seng Index and Hang Seng Tech Index plunging 2.38% and 3.21%, respectively.

A potential turnaround emerged before midday as Hong Kong's AI sector stabilized first. The Hong Kong Internet ETF (513770), heavily weighted in internet giants, rebounded from intraday lows to briefly erase all losses before closing down just 0.92%, after dropping over 2% earlier. The widening premium during the recovery signaled strong buying interest.

The ETF had fallen for five consecutive days, yet investors doubled down—net inflows totaled ¥54.14 million over this period, with ¥4.271 billion accumulated over 60 days, per exchange data.

Tech leaders showed mixed performance: Xiaomi Group-W rose nearly 3% intraday before closing up over 1%, while Kuaishou-W and Tencent Holdings slid over 1%, Bilibili-W and Meituan-W lost over 2%, and Alibaba-W dropped more than 4%.

The broader market weakness followed ambiguous U.S. jobs data that clouded rate-cut expectations, coupled with lingering concerns over AI valuations, fueling risk-off sentiment.

Hong Kong's AI sector demonstrated relative resilience, likely due to its valuation appeal. As of November 20, the CSI HK Internet Index traded at a P/E of just 22.47x—near a decade-low at the 14.23% percentile—well below the Nasdaq 100 (34.42x) and ChiNext Index (39.2x), and even lower than the Hang Seng Tech Index's historical P/E percentile (20.94%).

CMSC Securities noted that Hong Kong tech valuations remain historically depressed, offering significant room for recovery.

With internet giants reporting robust Q3 earnings and AI poised to enhance monetization, analysts highlight untapped potential in domestic AI plays, anticipating breakthroughs in models and applications.

CITIC Securities projects a 2026 rebound for Hong Kong stocks, citing improving fundamentals and deep valuation discounts. GF Securities expects a "volatile but gradual uptrend," with liquidity shifts potentially favoring globally competitive assets like internet stocks.

The Hong Kong Internet ETF (513770) tracks the CSI HK Internet Index, top-weighted by Alibaba-W (18.89%), Tencent (17.01%), and Xiaomi-W (10.05%). Its top 10 holdings—spanning AI cloud computing and applications—account for over 73% of the portfolio.

With assets exceeding ¥11.2 billion and average daily turnover above ¥600 million, the ETF offers T+0 trading without QDII quota constraints.

For lower-volatility exposure to Hong Kong tech, consider the Hong Kong Large-Cap 30 ETF (520560), blending high-growth names like Alibaba and Tencent with dividend stalwarts (e.g., China Construction Bank, Ping An).

*Caution: Recent volatility may persist. Investors should assess risk tolerance and manage positions accordingly.*

*Index data: The CSI HK Internet Index gained 109.31% in 2020 but fell 36.61%, 23.01%, and 24.74% in 2021–2023 before rebounding 23.04% YTD in 2024. Past performance ≠ future results.*

*Risk Disclosure: The ETF tracks an index launched on January 11, 2021 (base date: December 30, 2016). Holdings are for illustrative purposes only and do not constitute recommendations. The fund is rated R4 (higher risk) for aggressive investors (C4+).*