Chip stocks are soaring. Why can't they lift the Hang Seng Tech Index?
“I bought the Hang Seng Tech ETF in mid-April this year. At that time, I thought it should have reached the bottom, but it has still been adjusting in the past month. While those investors who bought the chip ETF have made a fortune.” Lu Feng (a pseudonym), an investor from Beijing, recently told Jiemian News.
Since early October 2025, the Hong Kong stock Internet and technology-related indexes have been continuously adjusting. The yields of ETF products tracking these indexes have been at the bottom of the market. Since last October, the cumulative losses of many Hong Kong Stock Connect Internet ETFs and Hang Seng Tech ETFs have exceeded 20%. The cumulative losses of products such as Bosera CSI Hong Kong Stock Connect Internet ETF and Fullgoal CSI Hong Kong Stock Connect Internet ETF are close to 40%.
“Bottom-fishing was too early”
In mid-April this year, Lu Feng placed orders for two Hang Seng Tech ETFs he was following on a securities app: He bought 50,000 yuan worth of shares each of Huaxia Hang Seng Tech ETF and Tianhong Hang Seng Tech ETF.
Lu Feng said that at that time, the Hang Seng Tech had been adjusting for more than six months, and he judged that it was time to bottom-fish. “Before buying, I asked two friends who held Hang Seng Tech-related funds, and they also thought that with the chip leading the market up, the Hang Seng Tech could be driven up.” he said.
However, a month has passed, and the Hang Seng Tech ETF has fluctuated, failing to bring positive returns to Lu Feng. “Bottom-fishing was too early.” As of May 22, the yields of his holdings in Huaxia Hang Seng Tech ETF and Tianhong Hang Seng Tech ETF were about -4.09% and -3.52% respectively.
Looking at a longer time frame, after the net asset value per unit of Huaxia Hang Seng Tech ETF reached a phased high on October 9, 2025, it began to fluctuate and decline. As of May 22, 2026, the fund's interval return was about -29.45%.
Huaxia Hang Seng Tech ETF is managed by Xu Meng, a fund manager at Huaxia Fund. During this round of net value decline, the fund's share has increased instead of decreasing. Since October 2025, the net increase in the fund's shares has exceeded 30 billion, and the current total scale exceeds 80 billion.
Looking at the performance of the Hang Seng Tech Index tracked by the fund, the index reached a recent high on October 2, 2025, and then began to decline. As of May 22, 2026, it had fallen by about 24.69% cumulatively. Judging from the fund performance, during the above period, the interval returns of many funds such as Huatai-PineBridge Hang Seng Tech ETF, GF Hang Seng Tech ETF, Tianhong Hang Seng Tech ETF, and Bosera Hang Seng Tech ETF were all close to -30%.
Since October 2025, the ETFs tracking different Hong Kong stock technology indexes have all performed poorly in terms of returns. Taking the CSI Hong Kong Stock Connect Internet Index as an example, this index also reached a recent high on October 2, 2025, and then continued to decline, with a cumulative decline of about 36.64%.
From October 2, 2025, to May 22, 2026, the returns of many funds such as Bosera CSI Hong Kong Stock Connect Internet ETF, Fullgoal CSI Hong Kong Stock Connect Internet ETF, Huabao CSI Hong Kong Stock Connect Internet ETF, and E Fund CSI Hong Kong Stock Connect Internet ETF, which track the CSI Hong Kong Stock Connect Internet Index, were below -30%, ranking at the bottom of the market during this period.
Technology or consumption?
The trend of the Hong Kong stock technology sector is in sharp contrast to the current rise of the chip sector. In comparison, from October 2, 2025, to May 22, 2026, the STAR 50 Index and the ChiNext Index have risen by about 19.76% and 21.63% respectively cumulatively.
Regarding the obvious difference between the current performance of the Hong Kong stock technology sector and the rising stock prices of the chip sector, Hui Jun, the fund manager of Shanghai Bank Digital Economy and Shanghai Bank Science and Technology Innovation Funds, recently analyzed to Jiemian News that the reasons lie in the “mismatch” of the industrial cycle and the “differentiation” of asset attributes. Currently, the core logic of the chip/semiconductor sector (especially the equipment segment in A-shares) is “counter-cyclical capacity expansion driven by self-reliance and control” and “fulfillment of rigid orders”, which essentially belongs to the structural growth of the upstream supply side; while the Hong Kong stock Internet sector is more on the demand side, and its performance highly depends on the macro-consumption recovery and the prosperity of terminal demands such as advertising and games. The driving forces of the two are different.
Galaxy Securities said in a recent research report that the rise and fall of the Hang Seng Tech Index are actually contributed by a few leading companies in the industry, especially the leading companies in information technology and optional consumption. At the macro level, the capital outflow from the Hang Seng Tech coincided with the expected interest rate hike by the Federal Reserve and the intensification of geopolitical risks. At the industry level, first, the decline of the heavyweight stocks in the Hang Seng Tech was because a leading domestic company directly impacted the profit expectations and market share of the constituent stocks. Second, the internal competition among the heavyweight stocks in the Hang Seng Tech has intensified. The “food delivery war” and the “red envelope war” have consumed a large amount of funds. Third, the HALO trading strategy has further exacerbated the decline of the Hang Seng Tech stocks. Among the constituent stocks of the Hang Seng Tech Index, Internet platform companies and consumer electronics enterprises dominate. The “hard technology” content is relatively low, and the consumption attribute is relatively strong. Finally, the Hang Seng Tech Index lacks a second echelon to hedge against the decline of the leading stocks.
Judging from the composition of the constituent stocks of the Hang Seng Tech Index, the “consumption attribute” is obvious. According to Wind data, among the constituent stocks of the Hang Seng Tech Index, the number of information technology and optional consumption stocks is the largest, with 14 and 12 respectively. In the industry weight of the Hang Seng Tech Index, the proportions of information technology and optional consumption are 51.22% and 42.62% respectively.
The top ten heavyweight stocks of the Hang Seng Tech Index are SMIC, Meituan-W, BYD Co., Ltd., Xiaomi Group-W, NetEase-S, Alibaba-W, Tencent Holdings, JD.com Group-SW, Baidu Group-SW, and Kuaishou-W in order, with a total weight of 69.95%. During the period from October 2, 2025, to May 22, 2026, the stock price changes of the above stocks were about 0.38%, -22.15%, -16.88%, -44.44%, -22.27%, -28.25%, -32.65%, -8.94%, -3.75%, and -46.05% respectively.
“There is also a capital preference: in the global high-interest rate environment, capital tends to allocate assets such as semiconductors that have high certainty of growth (strong orders and high prosperity); for assets such as the Hong Kong stock Internet that highly depend on the macroeconomic cycle, they are more cautious.” Hui Jun said.
Large model stocks to be included in the Hang Seng Tech
The quarterly review results announced by the Hang Seng Index Company on the 22nd showed that the Hang Seng Tech Index will include two large model stocks, MiniMax-W and Zhipu, and remove Kingdee International and Kingsoft at the same time. The number of constituent stocks will remain at 30. All changes will be implemented after the market closes on June 5 this year and will take effect on June 8.
MiniMax-W and Zhipu both listed on the Hong Kong stock market in early January this year. As of the close on May 22, their cumulative stock price increases were about 226.47% and 968.33% respectively.
A research report released by Huatai Securities on its WeChat official account on the 25th said that the adjustment of the index constituent stocks will prompt active and passive funds to re-adjust their positions. Investors can pay attention to relevant trading opportunities. However, such positive news has probably been digested by the market in advance, and investors need to be vigilant against the risk of fluctuations and declines after the positive news is realized.
Galaxy Securities said in the above research report that from a short-term exchange rate perspective on when to buy, one should wait for the US dollar to fall to a reasonable range. The US dollar liquidity is the “first variable” that dominates the short-term trend of Hong Kong stocks. Hong Kong stocks react more directly and quickly to the US dollar index and the US Treasury bond yield. The liquidity and valuation of Hong Kong stocks are deeply tied to the global US dollar environment. When the US dollar index strengthens and the US Treasury bond yield rises, overseas hedge funds and active foreign capital will preferentially reduce their holdings of non-US market assets such as Hong Kong stocks when the US dollar liquidity tightens. At the same time, the valuation of technology companies highly depends on the discount of future cash flows. When the US Treasury bond yield rises and the global interest rate increases, the valuation of the Hang Seng Tech Index will be directly depressed. If the new chairman of the Federal Reserve cuts interest rates or launches QE after taking office, the decline of the US dollar index to the range of 90 - 95 can be regarded as a right-side confirmation signal for the Hang Seng Tech Index.
CITIC Construction Investment Securities said in a recent research report that after full adjustment, the valuation attractiveness of the Hang Seng Tech Index has been significantly highlighted, and it is at one of the lowest valuation percentiles among the world's major broad-based technology indexes, providing a high safety margin for medium- and long-term investors.
CITIC Construction Investment Securities said that the systematic repair of the Hang Seng Tech needs to wait for the resonance of the three signals of “liquidity inflection point, AI commercialization verification, and easing of the competitive landscape”. However, the starting point of the AI technology cycle, excellent organizational structure and talent advantages, as well as the high elasticity of the TMT industry and the alpha attribute of large consumption, together constitute its core logic of long-term upward movement. In the medium and long term, as the overseas economy further steps into recession, under the pressure of external demand, domestic demand-side policies are expected to further strengthen. As one of the core pro-cyclical assets, the Hang Seng Tech is expected to enjoy the systematic revaluation under the policy catalysis.
This article is from the WeChat official account “Jiemian News” (ID: jwview), author: Xue Yufei, editor: Li Xiaoxuan, published by 36Kr with authorization.