JD.com shares plunged following its earnings release, dragging down heavyweight stocks and causing the Hang Seng Index to close 279 points lower. The two chip giants showed divergent trends post-earnings. With Korean stocks ending a seven-week losing streak, investors may want to refocus on them while establishing cash flow sources; consider the CSOP Korea Covered Call ETF.

The US July PPI rose 4.7% year-on-year, below market expectations and June's level, leading the market to lower expectations for near-term Fed rate hikes. However, external positives failed to lift Hong Kong stocks, as market focus shifted to the earnings season. Guidance and capital expenditure plans announced by individual heavyweight stocks after their results became key determinants of capital sentiment. The Hang Seng Index opened lower on Friday morning and trended downward, hitting a low of 25,089 points in late trading, breaking below the 100-day moving average. It closed at 25,116 points, down 279 points or 1.1%, with full-day turnover of HK$254.1 billion. The Tech Index fell 1.77% to close at 4,707 points. Southbound capital saw a net outflow of HK$1.316 billion.

JD.com $JD-SW (09618.HK)$ (9618) reported a 20.8% year-on-year increase in non-GAAP net profit for the second quarter to RMB 8.93 billion, beating market expectations. However, revenue fell 2.9% year-on-year. Additionally, the company stated that its European retail business, Joybuy, is still in the capacity-building phase and will increase investment over the next few quarters. Consequently, market attention shifted from profit improvement to the costs and returns of overseas expansion. JD.com closed at HK$110.2, down 10.41%; JD Logistics $JD LOGISTICS (02618.HK)$ (2618) posted second-quarter results largely in line with expectations. However, amid concerns over increased spending on JD.com's overseas and new businesses, its stock price faced selling pressure, closing at HK$12.23, down 13.69%, making it the blue-chip stock with the largest decline for the day. In contrast, JD Health ( $JD HEALTH (06618.HK)$ (6618) Interim results met expectations, with the market anticipating accelerated revenue growth in the second half. The stock price dipped slightly by HK$0.02 or 0.05%, closing at HK$39.5; JD Industrial $JD INDUSTRIALS (07618.HK)$ (7618) closed at HK$13.49, down 1.3%.

Although both leading domestic chipmakers reported earnings growth, the market reacted very differently to their outlook guidance. SMIC $SMIC (00981.HK)$ (0981) saw its Q2 net profit rise 2.62 times year-on-year to US$479 million, with revenue up 36.1% to US$3.006 billion and gross margin increasing to 25.3%. The company expects Q3 revenue to grow 2%-4% quarter-on-quarter, with gross margin between 26% and 28%, reflecting continued AI demand supporting capacity utilization. The stock closed at HK$70.8, up 4.81%, making it the best-performing blue-chip stock; Hua Hong Semiconductor $HUA HONG GRACE (01347.HK)$ (1347) saw its Q2 net profit jump 3.86 times year-on-year, with revenue also hitting a record high. However, Q3 sales revenue is forecast at only about US$770-780 million, with gross margin guidance of 16%-18%. The market viewed the outlook as below expectations, causing the stock to close at HK$130.2, down 11.55%. In the same sector, GDS Holdings $GDS-SW (09698.HK)$ (9698) saw interim net profit quadruple and raised its full-year revenue guidance, benefiting from AI data center demand. The stock closed at HK$34.24, up 10.31%.

The CK Hutchison group also faced profit-taking as the market focused on dividends and prospects. CK Hutchison $CKH HOLDINGS (00001.HK)$ (0001) reported a significant rise in interim net profit under IFRS 16 standards. However, excluding one-off items and the impact of its UK telecommunications business, core earnings rose only 7%. Management warned of increased uncertainty in the second half. The stock closed at HK$70.05, down 3.11%; CK Asset $CK ASSET (01113.HK)$ (1113) saw interim net profit rise 37.8%, with the interim dividend increased to 41 cents. However, the absence of a special dividend disappointed some investors. The stock closed at HK$45, down 6.45%.

Defensive telecom stocks attracted buying support. China Mobile ( $CHINA MOBILE (00941.HK)$ (0941) interim net profit fell 6.3% year-on-year, but the interim dividend exceeded market expectations; it closed at HK$82.05, up 1.05%; China Telecom $CHINA TELECOM (00728.HK)$ (0728) closed at HK$4.725, up 4.08%; China Unicom ( $CHINA UNICOM (00762.HK)$ 0762) rose 1.1%, closing at HK$6.335.

Among stocks with individual earnings releases, MTR Corporation $MTR CORPORATION (00066.HK)$ (0066) saw interim net profit more than double year-on-year to HK$15.872 billion, declared an interim dividend of 42 cents, closed at HK$33.24, up 2.85%; China Gold International $CHINAGOLDINTL (02099.HK)$ (2099) increased interim profit by 1.5 times, closed at HK$214.6, up 14.64%; Tingyi (Cayman Islands) Holding Corp. $TINGYI (00322.HK)$ (0322) rose 1.75%, closing at HK$13.35, hitting a new high.

Tech and internet stocks generally declined as risk appetite weakened; Meituan $MEITUAN-W (03690.HK)$ (3690) closed at HK$87.2, down HK$4.05 or 4.44%; Alibaba ( $BABA-W (09988.HK)$ 9988) fell HK$2 or 1.64%, closing at HK$119.9; Baidu $BIDU-W (09888.HK)$ (9888) fell 2.1% to close at HK$100.8; Kuaishou $KUAISHOU-W (01024.HK)$ (1024) dropped 1.86% to close at HK$40.06; Xiaomi $XIAOMI-W (01810.HK)$ (1810) slipped 1% to close at HK$25.62; Tencent $TENCENT (00700.HK)$ (0700) edged down 0.23% to close at HK$440; NetEase $NTES (09999.HK)$ (9999) bucked the trend, rising 0.99% to close at HK$193.6 on expectations of robust performance in its gaming business; AI model stocks weakened in the afternoon session, with Zhipu $Z.AI (02513.HK)$ (2513) released GLM-5.3, claiming its coding capabilities rival Claude Fable 5, but the stock still closed at HK$1,270, down 3.57%; MiniMax $MINIMAX-W (00100.HK)$ (0100) plunged 12.69%; biotech stocks also pulled back, with Akeso Biopharma $AKESO (09926.HK)$ (9926) closed at HK$96, down HK$7.6 or 7.34%; BeiGene $BEONE MEDICINES (06160.HK)$ (6160) fell 3.74% to close at HK$211.2.

Although Hong Kong stocks may have been under pressure recently due to earnings reports, South Korea's Kospi index ended its seven-week losing streak, rising about 11.5% this week. The CSOP KOSPI 200 Covered Call Active ETF ( $CSOP KOSPI 200 Covered Call Active ETF (03537.HK)$ 3537 announced its first monthly distribution since listing, paying 0.29 yuan per unit, with an ex-date of August 31. Based on the fund's net asset value (NAV) as of August 13, the target annualized distribution yield is 36%. The fund closed at 9.77 yuan last Friday, up 2.68%, reflecting a rebound in Korean stocks driven by the semiconductor and AI supply chains, which also provides a higher base for option premium income under its covered call strategy. Fund 3537 primarily gains exposure to the large-cap Korean equity market through KOSPI 200 futures and actively sells KOSPI 200 index call options to collect premiums. The fund does not directly hold all constituents of the KOSPI 200; instead, it combines futures and options strategies to generate cash flow from option premiums, particularly in volatile or range-bound markets.

The KOSPI 200 is anchored by core holdings such as Samsung Electronics, SK Hynix, Hyundai Motor, and major financial enterprises, with significant weightings in technology and semiconductors. Recent market sentiment regarding AI capital expenditure, memory chip prices, and SK Hynix's earnings outlook will directly impact Korean equities and the NAV of fund 3537. The fund's covered call strategy can provide option premium income in sideways or moderately rising markets. However, if the KOSPI 200 surges sharply, selling call options will cap some of the upside potential; conversely, in the event of a sharp decline, option premiums may not be sufficient to offset the fund's entire loss. For investors seeking exposure to Korea's large-cap tech and semiconductor stocks while prioritizing monthly cash flow, fund 3537 offers a covered call option strategy. However, when evaluating the fund, investors should consider the unit price, NAV, cumulative distributions, and total return, rather than focusing solely on the annualized distribution yield.

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