Witness history once again.
New Record!
The net purchases of southbound funds have exceeded HKD 1.3 trillion year-to-date, with the cumulative net inflow surpassing HKD 5 trillion since the launch of Stock Connect.
As core assets in the Hong Kong stock market, the technology sector has consistently been a key destination for capital inflows.
Today, although Hong Kong stocks opened higher but closed lower, they rebounded at the end of the session, with both the Hang Seng Index and the Hang Seng Tech Index closing higher, demonstrating unique resilience. Year-to-date, the Hang Seng Tech Index ETF (513180) has risen by 30.4%, while the underlying index tracked by the Stock Connect Technology ETF Fund (159101) has increased by 44.19%.
Despite ongoing market adjustments, multiple positive signals from both domestic and international fronts are converging. Factors such as China's upcoming "15th Five-Year Plan", improved relations between major powers, the Federal Reserve’s interest rate cuts, and sustained inflows of southbound capital are injecting new momentum into the Hong Kong stock market.
Particularly in new economy sectors such as leading internet companies, AI supply chains, and high-end manufacturing, if the upcoming earnings reports show strong performance, they could lead to a recovery in market risk appetite and foster a new round of structural rallies.
Section 01: Is the Adjustment Over?
Over the past month, the Hang Seng Tech Index has significantly retreated more than 10% from its year-to-date high. Although this decline is less severe than that seen in April, the current macro environment does not exhibit the same level of uncertainty as it did in April, making the likelihood of another extreme correction relatively low.
Although some foreign investment banks have recently suggested that global AI technology stocks are on the verge of a bubble, if we look solely at valuations, the major tech companies that truly drive the index—excluding outliers such as Tesla—are generally trading within the median range of their valuations over the past decade, and cannot yet be considered severely overvalued.
The recent high volatility in domestic and overseas AI technology sectors is primarily due to excessive gains in earlier stages, overly crowded trading, and significant profits accumulated by some investors.
Under these circumstances, even minor negative news, which may not necessarily be substantial, can trigger sell-offs.
From a medium- to long-term perspective, a pullback after a sharp rise is necessary.
Based on the current situation, this more-than-one-month pullback can temporarily be defined as a routine correction, which is reasonable.
Of course, whether this level of correction indicates a short-term bottom depends on several factors. For example, in the Hong Kong stock market, leading technology companies will release their Q3 earnings reports this week and next week. If results exceed expectations or there are positive forward-looking guidance or investment plans, the probability of triggering a new round of rebound is relatively high.
According to forward-looking forecasts from major foreign institutions such as Goldman Sachs, Morgan Stanley, and HSBC, the overall tone is optimistic yet cautious:
It is projected that the overall revenue growth of leading internet companies will remain in the range of 10%-15%. On the profit side, the ongoing “cost reduction and efficiency improvement” strategy is expected to lead to continued improvement in adjusted net profit margins and free cash flow for each company.
However, it should be noted that increased capital expenditures in AI, peaking investments in instant retail, and new international business ventures may have some short-term impacts, such as a decline in profit margins.
In the long term, however, these capital expenditures will eventually translate into earnings growth.
Investment banks particularly noted that during earnings calls, management's elaboration on the progress and commercial implementation of AI technology will have a greater impact on stock prices than mere financial data. The market will also closely monitor how large models enhance existing businesses, improve efficiency, and whether cloud services have returned to a growth trajectory.
Overall, if this round of earnings reports can generally confirm the logic of 'robust revenue growth + better-than-expected profit release,' it will greatly boost market confidence and drive a rebound in stock prices.
02. What about valuations?
In terms of valuation, whether compared horizontally or vertically, Hong Kong's technology sector remains attractive.
Despite Hong Kong's tech sector and Hang Seng Tech Index leading global gains this year and significantly outperforming the Nasdaq, their valuations remain in the mid-to-lower range.
As of November 10, the PE (TTM) of the Hang Seng Tech Index ETF (513180) stood at 23.09 times, placing it at the 30.75th percentile of its historical valuation since listing. Meanwhile, the PE (TTM) of the CSI HK Connect Technology ETF (159101) was 25.73 times, located at approximately the 37.08th percentile over the past decade.
Compared with major global technology indices, the valuations of Hang Seng Tech and CSI HK Connect Technology are significantly lower than that of the Nasdaq (approximately 42.5 times).
Another critical factor in valuation: liquidity.
The latest statistical data shows that on November 10, southbound capital net purchased HKD 6.654 billion worth of Hong Kong stocks, bringing the year-to-date net purchase amount to surpass HKD 1.3 trillion. Since the launch of Stock Connect, the cumulative net inflow has also exceeded HKD 5 trillion, setting a new record high since the mechanism’s inception.
ETFs have also become an important channel for Mainland investors to purchase Hong Kong stocks.
Among them, the Hang Seng Tech Index ETF (513180) attracted 4.734 billion yuan in the past 20 days, with a net inflow of 16.283 billion yuan year-to-date, and its latest scale reached 46.826 billion yuan.
Currently, insurance funds and public mutual funds constitute the main body of southbound capital, jointly contributing over 60% of the year-to-date net inflow, forming a barbell-shaped allocation pattern characterized by "technology growth + high dividend yields."
CITIC Securities estimates that by the end of next year, long-term southbound funds will still have an additional space of 1.54 trillion Hong Kong dollars, and over the next five years, they could bring an incremental inflow of approximately 11 trillion Hong Kong dollars. Moreover, emerging forces such as social security funds, pension funds, corporate annuities, and bank wealth management subsidiaries are still in their early development stages; if mechanisms are relaxed in the future, it will unleash configuration demands worth hundreds of billions of yuan.
The continuous inflow of these long-term funds not only improves market structure from a liquidity perspective but also drives the transformation of Hong Kong stocks towards fundamentals-based valuation systems. As the Stock Connect mechanism continues to be optimized and the supply of high-quality assets increases, the pricing power of southbound funds in Hong Kong stocks will further strengthen, providing solid support for the long-term healthy development of the market.
On the foreign capital side, according to authoritative media reports and official data, since 2025, foreign capital has maintained a net inflow into Hong Kong stocks, with a particularly significant increase in allocation intentions in core sectors such as technology and internet.
Hong Kong Exchanges and Clearing Limited data shows that from May to the end of July, long-term stable-type foreign institutional funds cumulatively flowed in by approximately 67.7 billion Hong Kong dollars, while short-term flexible-type foreign institutional funds flowed in by about 16.2 billion Hong Kong dollars.
Since late August, foreign institutions have frequently increased their positions in Hong Kong stocks. For instance, Citi Bank increased its holdings in CATL's H shares and Wuxi Apptec's H shares, and UBS Group Hong Kong Limited also increased its holdings in CATL's H shares and ZTE's H shares.
If major-country relations continue to ease, domestic economic fundamentals continue to improve, emerging industries such as AI continue to develop rapidly, and incremental funds brought by the Federal Reserve’s interest rate cuts materialize, foreign capital may continue to be net buyers of Hong Kong stocks.
Against the backdrop of gradually easing liquidity, the valuation benchmark of Hong Kong's technology sector also has the opportunity to rise to a new level.
03. Focus on Core Assets
With the rise of AI technology, core AI assets have become the target of global capital competition, especially high-quality large technology companies.
For example, the US stock M7, which siphons global funds and has become the backbone of the Nasdaq index, contributing most of the gains in the Nasdaq over the past few years.
In the Hong Kong stock market, similar counterparts can also be found, and these tech giants have become the core assets of the Hong Kong stock market.
This is not only due to their significant market capitalization but also stems from their outstanding fundamentals, unshakable competitiveness, strong profitability, and central role in future technological trends.
Based on financial data, these tech giants are among the few 'cash cows' in the Hong Kong stock market that can consistently achieve high-quality revenue and profit growth, with return on equity (ROE) and gross margins maintained at relatively high levels over the long term.
The vast digital ecosystems and powerful network effects they have built—Tencent’s WeChat social graph, Alibaba’s commercial infrastructure, and Meituan’s instant delivery network—are competitive barriers that require massive capital and extended periods to construct.
More importantly, in this technological revolution centered around AI that will determine the future, Hong Kong-listed tech giants occupy the most advantageous positions.
They possess the massive amounts of high-quality data essential for training large models, substantial computing power investment capabilities, and the richest array of commercial application scenarios.
For instance, AI can optimize advertising efficiency, enhance the precision of content distribution, drive growth in cloud computing businesses, and create new products and services (such as AI assistants).
This implies that they are not merely users of AI technology but also the main battleground for AI commercialization, reversing the trend of large tech firms shifting toward value stocks and returning them to growth stock status. Market valuation models have also smoothly transitioned from traditional price-to-earnings ratios to more complex frameworks that incorporate their AI potential, such as option models based on AI prospects.
Overall, Hong Kong-listed tech giants represent the most dynamic and innovative segment of China's 'new economy,' serving as the core assets enabling the Hong Kong market to attract global capital and shed its label as a 'valuation trough.' They are also the ballast for Hong Kong's stock indices and have the capacity to shape the future trajectory of the Hong Kong market.
04. Conclusion
Despite recent high volatility across global capital markets, the development direction of the AI industry remains unchanged for the technology sector. Key factors influencing the valuation of tech companies, such as geopolitical dynamics and liquidity, have shown positive changes. The pullback appears more like a halftime break rather than an end.
Investors need not panic excessively but should instead focus more on market changes to identify turning points in sentiment and signals of emerging opportunities.
As for specific sectors within the Hong Kong market, core AI technology companies and ETFs tracking technology indices—such as the Hang Seng Tech Index ETF (513180) and the HK Stock Connect Technology ETF Fund (159101)—still have the potential to remain in the spotlight.
Among these, the underlying index of the Hang Seng Tech Index ETF (513180) encompasses 30 leading Hong Kong-listed tech companies, covering both software and hardware technologies. Its portfolio is deeply focused on the upstream, midstream, and downstream segments of the AI industry chain, with constituent stocks including tech giants such as Tencent, Alibaba, Meituan, Kuaishou, and Baidu.
The Hang Seng Tech Index ETF (513180) is the largest and most liquid ETF tracking the Hang Seng Tech Index, with a latest scale of RMB 46.826 billion.
The HK Stock Connect Technology ETF Fund (159101) closely tracks the Guozheng HK Stock Connect Technology Index, focusing on cutting-edge technologies. It selects 30 leading tech companies with large market capitalizations, high R&D investments, and strong revenue growth. The top ten weighted stocks account for 79% of the index, offering a sharp focus. The constituent stocks include internet giants such as Tencent and Alibaba, as well as emerging players like Li Auto and BeiGene, comprehensively covering hot sectors such as 'software and hardware + new consumption + innovative pharmaceuticals + new EV manufacturers.'
The ETF Fund for Hong Kong Stock Connect Technology (159101) selects its sample from the 'Hong Kong Stock Connect' universe and is not subject to QDII quota restrictions, meaning it is less likely to experience premiums due to a shortage of QDII quotas; the individual stock position limit is 15%, enabling a 'top configuration' of leading technology stocks.
Notably, both the Hang Seng Tech Index ETF (513180) and the ETF Fund for Hong Kong Stock Connect Technology (159101) support T+0 trading. (End of article)
