【Bull Bull Almanac】Will 7709 have a chance to return home? How should beginners trade leveraged ETFs? What should we watch for in the Hang Seng Index’s second-half trend...?

Guests this episode: Xiong Liping (Independent Market Commentator), Lam Ho Leung (InvestmentHK Lemon)

Last time we covered U.S. stocks; this time it’s Hong Kong equities. $Hang Seng Index (800000.HK)$ Since July, the Hang Seng Index has staged a strong rally, surging over 3,000 points within a month. After a long period of dormancy, Hong Kong stocks appear to be coming back to life. Is there a chance the index could retest the 30,000 mark this year? Are undervalued Hong Kong tech stocks worth betting on at this stage, or are high-dividend favorites among local investors a safer bet? We’ve invited two experts to break it all down for you.

Xiong Liping: Hang Seng rallies 3,000 points, with a clear shift in capital flows

Hong Kong stocks have been trending upward since late June, when the Hang Seng Index hit a low of 22,518 points. From that trough, it has rebounded by more than 3,000 points. During this period, we’ve observed some capital rotating out of artificial intelligence (AI)-related stocks and into traditional sectors—particularly several heavyweight platform economy stocks, such as $BABA-W (09988.HK)$ 、 $TENCENT (00700.HK)$ and $MEITUAN-W (03690.HK)$ , etc. This is likely due to profit-taking in AI stocks ahead of the half-year financial close, with investors reallocating funds into lower-valued stocks and increasing their exposure to high-dividend holdings.

This leg of the Hang Seng’s rally has been primarily driven by two groups of stocks: platform economy names on one hand, and high-dividend and financial stocks—including mainland Chinese banks and international banks—on the other. These two groups, especially mainland bank stocks, have significantly boosted the broader index.

Xiong Liping: Near-term consolidation needed for Hang Seng; 30,000-point target remains challenging

The Hang Seng may need to consolidate around the 25,900–26,000 level for a while. Even if a pullback occurs, its magnitude is expected to be limited, with support likely emerging near 24,700 points. Going forward, market focus will center on two key factors: the Federal Reserve’s upcoming interest rate decision and whether earnings reports from Hong Kong-listed companies can continue to justify the recent strength in traditional sectors.

As for the most pressing question—can the Hang Seng reclaim the 30,000 level? Frankly, it’s quite difficult. Even returning to this year’s high of 28,000 points presents a significant challenge. Later this year, once AI-related stocks complete their adjustment phase, capital could rotate back into the sector. However, AI stocks currently carry relatively low weightings in the Hang Seng Index, making the performance of Tencent and Alibaba—the index’s two largest constituents—especially critical. Their shares would need to show clear strength, ideally driven by breakthroughs in AI applications or large models, to meaningfully lift the index. Conversely, if these two leaders deliver only modest gains while banks, utilities, and other high-dividend stocks undergo corrections, breaking above this year’s highs will indeed be very tough.

Xiong Liping on high-dividend stock strategies: Telecoms, mainland banks, and utilities all offer attractive opportunities

Regarding high-dividend stocks, we have recently seen some capital flowing back into telecom shares. $CHINA MOBILE (00941.HK)$ There is clearly capital inflow, and the dividend yield remains above 6%. If you already hold these shares, it is advisable to continue holding them. $HKT-SS (06823.HK)$ Its performance has been relatively stable, with a dividend yield around 6%; investors may consider a small position.

Domestic Chinese banks remain strong, along with $HSBC HOLDINGS (00005.HK)$ other financial stocks; investors may continue holding and monitor the situation. In the power sector, attention is mainly on two stocks: $HUANENG POWER (00902.HK)$ , which currently trades at a single-digit P/E ratio and offers a dividend yield exceeding 7%; and $CHINA RES POWER (00836.HK)$ , another high-dividend option worth watching.

In addition, the recent new stock market has been somewhat affected by the correction in AI-related stocks. Even if newly listed companies have AI-related concepts, investor subscription enthusiasm is likely to cool down, and we can no longer expect the same post-listing gains of 30% or even 100% as seen in the past.

Lemon Technical Analysis: Holding above 24,200 points could target 27,000

From a technical perspective, although the Hang Seng Index (HSI) has shown recent improvement, most investors remain focused on the US stock market, given its broader selection and the fact that Hong Kong stocks still lag behind other major markets. However, this 3,000-point rebound has indeed been stronger than expected, as the HSI has broken above the short-term resistance level near 25,000 points.

The first short-term support level to watch is around the 24,200 mark. If this level holds, the Hang Seng Index could rise toward 27,000 points, and under a more optimistic scenario, even reach 28,000 points. However, if it fails to hold, the index may continue declining and potentially retest the 22,000 level.

Regarding individual stocks, $XIAOMI-W (01810.HK)$ and $MEITUAN-W (03690.HK)$ was previously heavily undervalued, with a very sharp price decline, but has performed quite well during this recent Hang Seng Index rebound. Additionally, energy stocks such as $CNOOC (00883.HK)$ are also worth considering for positioning.

Lemon’s Asset Allocation Strategy: Monitor U.S. market volatility and keep dry powder for pullbacks

In terms of overall asset allocation, the current strategy is to gradually reduce U.S. equity exposure, converting approximately 20% to 30% of funds into cash, awaiting a deeper market correction. Signs of a pullback in the broader U.S. market have started to emerge, and maintaining ample dry powder will allow us to accumulate high-quality stocks during the dip.

If allocating assets among cash, U.S. stocks, and Hong Kong stocks, roughly 50% would still be allocated to the U.S. market, with the remaining 10% to 20% invested in Hong Kong equities.

Lemon’s Warning on Leveraged ETFs: Analysis of the 2x Long SK Hynix Product

Finally, let’s address the topic of $SK Hynix (000660.KR)$ , which many investors are watching closely—this requires separating two distinct issues for discussion.

Regarding $CSOP SK Hynix Daily Max (2x) Leveraged Product (07709.HK)$： This product has plummeted from around HK$200 to just over HK$20, which is indeed alarming—but that’s the nature of leveraged ETFs: danger and risk go hand in hand. Everyone must remember that because this is a 2x leveraged long product, its losses compound during downturns. Never assume that if SK Hynix’s underlying stock rebounds to its all-time high, this ETF will return to HK$200—in fact, it’s almost impossible for it to ever reach that level again.

Additionally, note that this ETF has switched to a variable leverage structure, with a daily leverage cap of 2x and a floor of 1.1x, making it even more improbable for the ETF to ever climb back to HK$200.

Regarding $SK Hynix (000660.KR)$ / $SK hynix (SKHY.US)$Underlying stock outlook: The trend for memory chip stocks has already shifted. Observing SK Hynix’s price chart reveals that a clear topping pattern has fully formed—the period of fastest growth and greatest upside potential is already behind us. Current trading is purely short-term speculation on rebounds, with intraday trades targeting gains of around 10% before exiting promptly.

Proper use of leveraged products: A 2x leveraged long product is most suitable to hold during strongly trending, one-directional markets—whether sharply rising or falling—where using 2x leverage can be advantageous. However, if the market lacks a clear trend or moves against your position, holding such products can result in devastating losses.

Financial instruments themselves aren’t inherently wrong—it’s often said, 'Water can carry a boat, yet also capsize it.' Bull/bear certificates, options, and leveraged ETFs are fundamentally just financial products and shouldn’t be demonized. However, if users don’t understand their underlying mechanics, fail to implement proper risk management, or neglect to calculate position sizing and set stop-losses, their losses will naturally far exceed those from trading the underlying stock directly.

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