Southbound capital surged into the market to support Alibaba; the Hang Seng Index (HSI) reversed losses in the afternoon to close up 17 points. Biotech stocks continued to strengthen against the trend, while AI hardware stocks faced pressure. The E Fund HKEX Tech 100 ETF outperformed the Hang Seng TECH Index. Investors optimistic about the long-term development of Hong Kong tech stocks may take note.

The temporary ceasefire arrangement between the US and Iran expired, with neither side returning to negotiations and Trump refusing to extend the agreement, adding further uncertainty to the situation in the Strait of Hormuz. Brent crude oil futures climbed back above $90 per barrel, and the yield on US 30-year Treasury bonds rose to approximately 5.31%, hitting a new high since 2007. Hong Kong stocks were dragged down by external risks in the early session. However, southbound buying interest strengthened significantly in the afternoon, driving the HSI to recover its losses. The index ultimately closed at 25,471 points, ending with a gain of 17 points. Total turnover reached HK$255.5 billion. The Hang Seng China Enterprises Index rose 13 points to close at 8,453 points, while the Hang Seng TECH Index fell 42 points or 0.9% to close at 4,739 points. Net inflows from southbound capital exceeded HK$14 billion.

Alibaba $BABA-W (09988.HK)$ (9988) became the main pillar supporting the market, shifting from volatile to strong in the afternoon and closing up 3.68% at HK$126.7. Market attention focused on the company's launch of the beta version of its AI music model "Happy Shrimp," which allows users to generate complete songs based on text prompts. On the same day, Alibaba Cloud activated its third data center in South Korea and launched Agentic AI services, expanding local capabilities for cloud, agent development, deployment, and management. Southbound capital entered the market in the afternoon, aligning with pre-earnings capital positioning, driving Alibaba to significantly outperform the broader market.

Baidu $BIDU-W (09888.HK)$ (9888) rose 0.8% ahead of its earnings release, closing at HK$101.1. Its subsidiary product "Baidu Partner" achieved 6.743 million monthly active users on desktop in July, a month-on-month increase of over ten times. Together with Tencent's WorkBuddy, they account for approximately 60% of the domestic AI office agent market. Xiaomi $XIAOMI-W (01810.HK)$ Meituan (1810) also rose 1.16% ahead of its earnings release, closing at HK$26.18; in contrast, Tencent $TENCENT (00700.HK)$ (0700) fell 0.9%, closing at HK$442.4; Kuaishou $KUAISHOU-W (01024.HK)$ (1024) dropped 1.75%, closing at HK$39.38.

The innovative drug sector bucked the market trend, supported by data on global expansion. Reports indicate that 38 new innovative drugs received global approval in mainland China during the first half of the year, with total out-licensing deal value reaching approximately US$110 billion, a record high for the period. Wuxi Bio $WUXI BIO (02269.HK)$ (2269) rose 5.24%, closing at HK$48.58; BeiGene $BEONE MEDICINES (06160.HK)$ (6160) gained 3.18%, closing at HK$220.8; Innovent Bio $INNOVENT BIO (01801.HK)$ (1801) advanced 1.36%, closing at HK$96.65; Wuxi Apptec $WUXI APPTEC (02359.HK)$ (2359) rose 1.18%, closing at HK$205.2. Among individual biotech stocks, CSPC Pharma $CSPC PHARMA (01093.HK)$ (1093)'s subsidiary, CSPC Innovation, turned a mid-term loss into a profit, recording nearly RMB 1.3 billion in earnings, with revenue doubling. CSPC Pharma rose 0.5%, closing at HK$8.8; Kelun Biotech $SKB BIO (06990.HK)$ (6990) also swung to a mid-term profit of RMB 390 million, with revenue up 3%. Its share price rose 3.82%, closing at HK$542.5.

AI model and hardware stocks were generally under pressure. In the latest blind test of large language models, several of Anthropic's Claude Opus 4 series models occupied the top five spots in the comprehensive rankings. The market is reassessing the competitive pressure on mainland China's large model companies, with Zhipu AI $Z.AI (02513.HK)$ (2513) falling 13.3% to close at HK$1,043; MiniMax $MINIMAX-W (00100.HK)$ (0100) dropping 4.49% to close at HK$318.8; Lenovo Group $LENOVO GROUP (00992.HK)$ (0992) declining 5.09% to close at HK$31.34; Kingboard Laminates $KB LAMINATES (01888.HK)$ (1888) down 8.12% to close at HK$38.7; Xunce $XUNCE (03317.HK)$ (3317) falling 8.52% to close at HK$133.2; Guanghe Technology $DELTON (01989.HK)$ (1989) dropping 8.23% to close at HK$137.2; GigaDevice $GIGADEVICE (03986.HK)$ (3986) fell 6.59% ahead of its earnings release, closing at HK$517.5.

Financial stocks weakened due to the surge in long-term bond yields and news regarding the verification of funding sources for mainland clients. It was reported that HSBC $HSBC HOLDINGS (00005.HK)$ (0005) notified some mainland investment service clients in Hong Kong, requiring confirmation that investment funds originate from legitimate overseas sources. Its share price fell 0.6% to close at HK$162.6; Standard Chartered $STANCHART (02888.HK)$ Bank of China (2888) fell 0.3% to close at HK$237.2; BOC Hong Kong $BOC HONG KONG (02388.HK)$ (2388) dropped 0.8% to close at HK$50; AIA $AIA (01299.HK)$ (1299) declined over 2% to close at HK$72.55; China Life $CHINA LIFE (02628.HK)$ (2628) fell 3.93% to close at HK$26.88; Ping An $PING AN (02318.HK)$ (2318) dropped 1.64% to close at HK$53.9.

Middle East risks and China's five-year oil and gas plan provided fundamental support for oil and gas stocks. The plan proposes that domestic oil and gas supply will reach 440 million tonnes of oil equivalent by 2030. PetroChina $PETROCHINA (00857.HK)$ (0857), CNOOC $CNOOC (00883.HK)$ (0883), and Sinopec $SINOPEC CORP (00386.HK)$ (0386) also became market焦点. PetroChina rose 2.5% to close at HK$9.805; CNOOC gained 2% to close at HK$24.42; Sinopec edged up 0.46% to close at HK$4.31. On another front, the Chengdu Auto Show will open this Friday, with multiple automakers set to launch new models. BYD $BYD COMPANY (01211.HK)$ (1211)'s Fangchengbao T9 and new Tang family models are scheduled to debut. The market is also paying attention to consumption policies related to new energy vehicles and the pace of new product launches. The stock closed at HK$90 today, down slightly by 0.056%.

In terms of earnings-driven stocks, Shanghai Fudan $SHANGHAI FUDAN (01385.HK)$ (1385) saw its interim net profit rise by 3.39 times and revenue increase by 21%, but declared no dividend, leading to a 2.6% drop in its share price; Wanguo Gold $WANGUO GOLD GP (03939.HK)$ (3939) reported a 51% increase in interim net profit to over RMB 900 million, declared a dividend of HK$0.06 per share, and rose 2.36%; Chuangxin Shiye $CHUANGXIN IND (02788.HK)$ (2788) saw its interim profit rise by 1.6 times to RMB 2.3 billion, closing at HK$15.71, down 7.8%; Huazhu Group $HWORLD-S (01179.HK)$ (1179) reported Q2 profit of nearly RMB 1.6 billion, up 2%, and raised its full-year revenue guidance, closing at HK$36.30, up 11%; Conant Optical $CONANT OPTICAL (02276.HK)$ (2276) saw its interim profit rise by 10%, declared a dividend of HK$0.20 per share, and closed at HK$40.66, down 0.684%.

Hong Kong stocks reversed losses in the afternoon session, driven by substantial inflows of southbound capital and a sharp rally in Alibaba. The Hang Seng Index closed at 25,471 points, edging up 17 points; however, the Tech Index still fell 0.9%. The E Fund HKEX Tech 100 ETF $E Fund HKEX Tech 100 ETF (03456.HK)$ (3456), although weighed down by profit-taking in AI hardware and large model concepts, closed at HK$8.40, down only 0.24%, showing significantly better resilience than the Hang Seng Tech Index. This ETF primarily tracks the HKEX Tech 100 Index, holding over 100 Hong Kong-listed technology and innovative enterprises. It covers six major sectors: AI, biotechnology and pharmaceuticals, electric vehicles and intelligent driving, information technology, internet, and robotics. A key feature of the product is its broader diversification compared to typical tech ETFs concentrated in large platform stocks. In addition to tech giants like Alibaba, Tencent, Xiaomi, and Baidu, it also includes SMIC $SMIC (00981.HK)$ (0981), Wuxi Bio (2269), BeiGene (6160), Innovent Bio (1801), and other companies involved in AI, robotics, and smart vehicles. The higher dispersion of constituent stocks allows investors to configure a more complete innovation industry chain of Hong Kong stocks through a single ETF.

Alibaba rose 3.68% today as Alibaba Cloud launched its third data center in South Korea, boosting the ETF's internet and cloud allocations. The biotech sector was supported by news that the value of overseas licensing deals for innovative drugs from mainland China reached approximately USD 110 billion in the first half of the year, a record high for the period. Wuxi Bio rose 5.24%, BeiGene rose 3.18%, and both Innovent Bio and Wuxi Apptec performed well, reflecting how the pharmaceutical allocation in 3456 helps mitigate the impact of trends in traditional tech-internet stocks. Conversely, profit-taking in AI hardware and large model concepts limited the full-day performance of 3456, with Zhipu AI (2513) and MiniMax (0100) falling 13.3% and 4.49% respectively, but the ETF still outperformed the Tech Index. Additionally, mainland China's Unitree Robotics is set to list on the STAR Market this Wednesday, with retail subscription oversubscribed by more than 5,500 times earlier, keeping market focus on the hype around the humanoid robot industry. As 3456 also covers the robotics theme, it allows participation in relevant long-term development trends. However, investors should note that the product remains influenced by tech stock earnings, AI capital expenditure, chip cycles, and market risk appetite. It is more suitable for investors who are bullish on the long-term development of Hong Kong tech stocks, can tolerate higher volatility, but do not wish to bet solely on one or two tech stocks.

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