Earnings season is here. Is the Hang Seng Tech ETF still a good choice?

Recently, the Hong Kong stock market has shown a clear rebound due to a trading logic called “TACO(Trump Always Chickens Out),” with the Hang Seng Index futures night session soaring over 3% at one point. However, in stark contrast, the Hang Seng Tech Index did not follow the rise, leaving many investors puzzled.

Let me briefly introduce the Hang Seng Tech Index: it selects the top 30 core technology leading companies in the Hong Kong stock market, including giants like Tencent, Alibaba, Xiaomi, NetEase, and Baidu. It is akin to the Nasdaq in Hong Kong—highly flexible, with strong growth potential, representing China’s technology and internet sector.

Table: Top 10 Constituents of the Hang Seng Tech Index and Their Weights

Data source: Wind

Recently, the financial reports of leading Hong Kong tech internet companies have been released one after another. Overall, their results show a consistent pattern: revenue continues to grow, but profits face pressure. For example, some top companies’ cloud business revenue increased by about 30% to 40% year-over-year, advertising and gaming businesses maintained steady growth, but overall profit growth was significantly slower than revenue growth, even experiencing periodic declines.

Why does this happen? Essentially, it’s due to a significant increase in AI-related investments, which temporarily boost costs rapidly; while revenue continues to improve, it cannot fully offset the pressure brought by these investments. In other words, AI industry investments have already been implemented, but the returns are still gradually materializing. Therefore, from a broader perspective, the core contradiction in the tech internet sector has shifted from whether they have AI capabilities to when these investments will translate into revenue and profit. This also indicates that the market sentiment is shifting from “rising valuations based on AI stories” to “focusing on real performance.”

The development of the AI industry behind the Hang Seng Tech Index has two main highlights:

First, AI demand is moving from concept to reality. Previously, everyone only cared about how powerful the models were; now, the focus is on how to implement them profitably. New product forms like AI Agents and OpenClaw are emerging continuously, with model invocation counts skyrocketing, directly driving a surge in cloud computing demand. Cloud services have evolved from mere infrastructure to a main profit driver based on usage fees.

Second, a complete business closed-loop is taking shape. Many leading internet platforms are shifting their business models, no longer just providing models but reconstructing their systems through model architecture, coordinating computing power and cloud resources, and recruiting talent. They are gradually forming a full chain from models and cloud to applications. Compared to single large model providers, this full-chain model is easier to monetize and has higher barriers to entry. Industry data shows that by 2025, global API calls for large models will reach trillions, further expanding the commercial space for AI applications.

In summary, the recent volatility in the Hang Seng Tech Index is essentially the market returning to rationality, adjusting sector valuations to more reasonable levels.

So, how should we view the current stage of the index’s allocation value?

After the adjustment, the valuation percentile of the Hang Seng Tech sector in the global technology sector has fallen to 27%, a relatively low level. Historically, after a phase of rapid rise, the Hang Seng Tech Index generally experiences valuation retracement and market expectation adjustments. Although this process involves fluctuations, it lays a foundation for future price movements. Therefore, for long-term investors in this sector, now might be a good entry point. The Hang Seng Tech ETF E Fund (513010, Connect Fund A/C: 013308/013309), according to Wind data, has seen net capital inflows for five consecutive trading days, with the latest size exceeding 30 billion yuan.

Risk reminder: Funds are subject to risks; investment should be cautious.