Hong Kong stocks opened higher early on July 15th, with leading internet companies gaining strength during the session. Shares of TENCENT surged over 4%, while BABA-W rose more than 3%. KUAISHOU-W gained over 2%, and MEITUAN-W followed suit. The on-market price of the Hong Kong Internet ETF (513770), which holds significant positions in these internet leaders, once climbed nearly 2% and is currently up 1.69%. Capital flows have clearly improved, with 513770 seeing cumulative net inflows exceeding 293 million yuan over the past five days.
Reports indicate that the domestic AI large model unicorn DeepSeek has commenced its IPO preparations, with the potential to submit its listing application within this year. This development is expected to catalyze both the AI large model and application sectors.
Market Analysis and Potential Catalysts
Analysis suggests that major large model players with integrated advantages in self-developed chips, cloud computing, application scenarios, and traffic gateways, such as Alibaba and Tencent, have significantly lagged in this round of the AI rally. This underperformance is primarily attributed to drag from their traditional businesses and pressure from external liquidity. As these external factors are digested, their valuations are anticipated to realign with AI-driven narratives.
Recent significant capital inflows into the Hong Kong internet sector may stem from multiple favorable factors, including a "valuation floor, southbound capital returning, and AI catalysts." The sector experienced extreme valuation compression in June, with the price-to-earnings (PE) ratio of the CSI Hong Kong Stock Connect Internet Index hitting an absolute bottom at the 0th percentile of its 10-year range. However, its fundamentals did not deteriorate, and the suppressing factors began to reverse in early July. This reversal is compounded by a loosening of crowded overseas AI trades, prompting capital to exit high positions; the dense rollout of domestic AI industry catalysts; and a clear return of southbound capital.
Brokerage Perspectives and Outlook
Guosen Securities pointed out that with the explosive growth of tokens driven by agents since the beginning of the year, the business models of large model companies are gradually forming a closed loop. Their revenue growth far outpaces the increase in training costs, and the gross margins of these model companies are continuously improving. The current AI investment narrative is gradually shifting from demand-side concerns to whether the supply side can support subsequent order fulfillment.
A Goldman Sachs research report stated that current Hong Kong internet stock prices have already fully priced in pessimistic expectations regarding AI investment losses and pressure on core businesses. With subsidies narrowing and monetization of cloud and AI applications accelerating, profits are expected to reach an inflection point in the second or third quarter. The report suggests gradually building positions in high-quality Hong Kong internet leaders.
Focus on Investment Vehicles
The market is focusing on the value reassessment of Hong Kong internet leaders amid the AI transformation. The Hong Kong Internet ETF (513770) and its feeder funds (Class A 017125; Class C 017126) passively track the CSI Hong Kong Stock Connect Internet Index. Its top ten holdings aggregate tech giants like BABA-W and TENCENT, along with AI application companies across various sectors, showcasing significant leading advantages. The ETF offers intraday T+0 trading with good liquidity.
Alternative Strategy for Volatility Management
For investors bullish on Hong Kong tech but seeking to reduce volatility, the market's first Hong Kong Top 30 ETF (520560) can be considered. It employs a "tech + dividends" barbell strategy by design. Its portfolio includes both high-volatility tech stocks like Alibaba and stable, high-dividend stocks from sectors such as banking and insurance, making it an ideal long-term core holding for Hong Kong market exposure.
Important Investor Reminders
Investors are reminded that recent market volatility may be elevated, and short-term price movements do not indicate future performance. It is crucial to invest rationally based on one's own financial situation and risk tolerance, paying close attention to position sizing and risk management.
The Hong Kong Internet ETF (513770) and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. The index's base date is December 30, 2016, and it was published on January 11, 2021. Its constituent stocks are adjusted according to its compilation rules. Index constituents mentioned are for illustrative purposes only; descriptions of individual stocks are not investment advice of any form and do not represent the holdings or trading动向 of any fund managed by the fund manager. The fund manager assesses this fund's risk等级 as R4 - Medium-High Risk, suitable for Aggressive (C4) and above investors. Any information appearing herein is for reference only. Investors must be responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to readers, nor is there any liability for direct or indirect losses arising from the use of this content. The performance of other funds managed by the fund manager does not guarantee this fund's performance. Past fund performance does not indicate future results. Fund investment carries risk; caution is advised in fund investment.