On August 28, compared to the robust A-share market, Hong Kong stocks overall continued their correction. Although there was a rally in the afternoon following A-shares' strong rebound, all three major indices closed lower.

The "tech duo" declined together, with tech leaders significantly retreating due to MEITUAN-W's second-quarter profit decline dragging down performance. MEITUAN-W fell over 12%, while Alibaba-W dropped nearly 5%. The Hong Kong Internet ETF (513770), which heavily invests in Hong Kong internet leaders, opened low and continued declining, with intraday prices falling over 3% at one point, closing down 1.51%. The ETF maintained a notable high premium throughout the day, with a closing premium rate of 0.84%, suggesting that buying funds were actively entering on dips.

Shanghai Stock Exchange data shows that the Hong Kong Internet ETF (513770) has received net inflows of 870 million yuan over the past 10 days for 8 consecutive days.

In the innovative drug sector, continuing the recent downward trend, the Hang Seng Hong Kong Connect Innovative Drug Select Index, which focuses on high-purity innovative drug R&D targets, fell over 4% at one point and closed down 1.67%. The Hong Kong Connect Innovative Drug ETF (520880) closed down 1.72% in market price, also maintaining sustained wide premiums intraday, with a closing premium rate of 0.67%.

Yesterday, the Hong Kong Connect Innovative Drug ETF (520880) experienced a deep correction, with funds actively buying on dips. Shanghai Stock Exchange data shows that the Hong Kong Connect Innovative Drug ETF (520880) received net inflows exceeding 25 million yuan in a single day.

Since June, Hong Kong stocks have clearly underperformed A-shares, with the continued weakness of the Hong Kong dollar exchange rate leading to liquidity tightening by the Hong Kong Monetary Authority being the main cause. With expectations for Fed rate cuts in September significantly increasing, a liquidity inflection point for Hong Kong stocks is approaching, and catch-up potential may be expected.

China Merchants Securities stated that the improvement in liquidity narrative is sufficient to support Hong Kong stocks' periodic catch-up rally, narrowing the gap with A-shares that have risen rapidly recently.

Specific opportunities in tech leaders and innovative drug sectors:

1. Hong Kong Internet ETF (513770) — AI Market Expansion, Capturing Core Hong Kong AI Targets

Caitong Securities pointed out that DeepSeek-V3.1 supports domestic chips, with domestic computing power entering a main upward phase. On the other hand, the Federal Reserve's attitude is shifting, overseas liquidity is becoming looser, AI markets are expected to expand, application directions are initially stabilizing, and attention should be paid to Hang Seng Tech leaders at congestion lows.

The fund manager of Hong Kong Internet ETF (513770) stated that in the AI era, internet companies have unique advantages: they are not only funders of AI computing power but also technical developers of AI large models, and important providers of mainstream AI applications, combining data + capital + access portals, making them important hubs in the AI era.

2. Hong Kong Connect Innovative Drug ETF (520880) — Short-term Sentiment Disturbance, Focus on Correction Buying Opportunities

US President Trump reiterated consideration of imposing tariffs as high as 250% on imported drugs and claimed he would reduce US drug prices by 1400% to 1500%. Analysis suggests that recent poor sector sentiment may be related to uncertainties brought by related news.

However, most institutions believe that short-term volatility may not change the long-term logic of the domestic innovative drug industry. Recent policy positives continue, with more cross-border BD transactions expected within the year. The international value of Chinese innovative drug assets is steadily improving, and short-term buying opportunities due to sentiment disturbances may warrant attention.

Seizing Hong Kong stocks' catch-up opportunities, focus on Hong Kong's tech duo! Data shows that the Hong Kong Internet ETF (513770) and its feeder funds (Class A 017125; Class C 017126) passively track the CSI Hong Kong Connect Internet Index, becoming core Hong Kong AI targets through heavy positions in Hong Kong internet leaders. According to the fund's second-quarter report, as of the end of June, the top 4 holdings of Hong Kong Internet ETF (513770) were Xiaomi Corporation-W, Tencent Holdings, Alibaba-W, and MEITUAN-W, with combined weightings of 54.74%. The top ten holdings had combined weightings exceeding 72%.

As of the end of July, the Hong Kong Internet ETF (513770) had fund assets exceeding 7.4 billion yuan, with average daily trading volume of 593 million yuan year-to-date, supporting intraday T+0 trading without QDII quota restrictions and good liquidity.

The Hong Kong Connect Innovative Drug ETF (520880) passively tracks the Hang Seng Hong Kong Connect Innovative Drug Select Index and is the first ETF in the market tracking this index. The Hang Seng Hong Kong Connect Innovative Drug Select Index precisely focuses on the innovative drug industry chain, with constituent stocks mainly being innovative drug R&D companies, high concentration of heavy-weight stocks, and significant leading advantages.

Note: The above individual stocks are all among the top 15 weighted stocks of the Hang Seng Hong Kong Connect Innovative Drug Select Index, presented for display only. Individual stock descriptions do not constitute any form of investment advice and do not represent holding information or trading intentions of any fund under management.

Year-to-date through the end of July, the Hang Seng Hong Kong Connect Innovative Drug Select Index cumulatively rose 101.58%, leading various innovative drug indices, outperforming the Hang Seng Index (23.50%) and Hang Seng Tech Index (22.05%) by 78.08 and 79.53 percentage points respectively, showing outstanding excess performance.

The Hang Seng Hong Kong Connect Innovative Drug Select Index has a base date of December 31, 2020, and publication date of July 17, 2023. Since the index's publication, complete annual returns were: 2021: -22.72%; 2022: -16.48%; 2023: -19.76%; 2024: -14.16%. Index constituent composition adjusts timely according to index compilation rules, and backtested historical performance does not predict future index performance.

Reminder: Market volatility may be significant recently, and short-term gains and losses do not predict future performance. Investors must invest rationally according to their financial conditions and risk tolerance, paying high attention to position and risk management.

Data sources: Shanghai and Shenzhen Stock Exchanges, etc.

Risk Warning: The Hong Kong Internet ETF passively tracks the CSI Hong Kong Connect Internet Index, which has a base date of December 30, 2016, and was published on January 11, 2021. Index constituent composition adjusts timely according to index compilation rules. Index constituent stocks in the text are for display only, and individual stock descriptions do not constitute any form of investment advice and do not represent holding information or trading intentions of any fund under management. The fund management company assesses this fund's risk level as R4 - medium-high risk, suitable for aggressive (C4) and above investors. Any information appearing in this text (including but not limited to individual stocks, comments, predictions, charts, indicators, theories, any form of expression, etc.) is for reference only, and investors must be responsible for any independent investment decisions. Additionally, any views, analyses, and predictions in this text do not constitute investment advice in any form for readers and bear no responsibility for any direct or indirect losses caused by using the content of this text. The performance of other funds managed by the fund management company does not guarantee fund performance, past fund performance does not represent future performance, fund investment carries risks, and fund investment requires caution.