Hong Kong market indices showed mixed performance on Tuesday, with the Hang Seng Index closing slightly lower while the Hang Seng Tech Index edged up. Multiple positive external catalysts fueled a rally in Korea-focused ETFs, while geopolitical risks rekindled energy inflation concerns, leading to a broad retreat in gold ETFs.

By the close, the Hang Seng Index slipped 0.17% to 25,396.51 points, with total turnover reaching HK$263.71 billion. The Hang Seng Tech Index gained 0.33% to 4,792.39 points.

Among the top Hong Kong-listed ETFs by assets, the Tracker Fund of Hong Kong (02800) closed flat at HK$25.88. The Hang Seng China Enterprises Index ETF (02828) edged down 0.09% to HK$86.72, while the iShares Hang Seng Tech ETF (03067) rose 0.3% to HK$10.11.

South Korea ETFs Rally on Multiple External Catalysts

South Korea-focused ETFs advanced sharply. The CSOP Double Long Samsung Electronics (07747) surged 6.33% to HK$79.58. The CSOP Hong Kong-Korea Tech Index ETF (03431) climbed 3.41% to HK$10.62, and the TR Korea (02848) gained 2.1% to HK$1,802.

Reports indicate that Singapore's sovereign wealth fund, Temasek, is planning its first direct investment in the South Korean stock market, targeting heavyweights like Samsung Electronics and SK Hynix. Temasek believes memory chips remain undervalued within the AI supply chain. Mark Newton, Head of Technical Strategy at Fundstrat Global Advisors, noted that the iShares MSCI South Korea ETF has broken through a key technical level, suggesting the potential for further short-term gains. Additionally, the release of moderate U.S. CPI data eased market concerns about further Federal Reserve rate hikes, broadly supporting tech stocks.

Gold ETFs Retreat as Geopolitical Tensions Stoke Inflation Worries

Gold ETFs fell broadly as heightened geopolitical tensions and ongoing restrictions in the Strait of Hormuz fueled energy inflation concerns. The Guotai Gold Stock ETF (517400.SH) dropped 4.63% to 1.567 yuan. The Yinhua Gold Stock ETF (517520.SH) declined 4.53% to 1.981 yuan, and the China Asset Management Gold Stock ETF (159562.SZ) fell 4.34% to 2.159 yuan.

The failure of U.S.-Iran negotiations to reach a consensus has reduced the likelihood of a near-term reopening of the Strait of Hormuz, keeping oil prices elevated at $88 per barrel. Gold prices accelerated their decline in the afternoon session, with New York gold falling below $4,440 per ounce. Geopolitical risks are prompting the market to reassess the outlook for energy inflation. Guotai Junan Futures commented that the current macro landscape is focused on the tug-of-war ahead of the U.S. inflation data release. While a weakening labor market lowers the probability of rate hikes, a potential rebound in July's core CPI due to factors like chips, electronics, and tariffs could briefly disrupt rate cut expectations and weigh on gold prices.

Institutional View

CICC believes that the rebound in Hong Kong stocks since late June has been almost entirely valuation-driven, with the Hang Seng Index's forward P/E having returned to above its 10-year average. However, the position of active equity public funds in Hong Kong stocks fell to 15.1% in the second quarter, the lowest level since the third quarter of 2022. This may imply room for future capital replenishment, but the market's breakthrough from its current range still requires catalysts such as further policy measures or technological breakthroughs.

ETF News

The Dacheng Securities ETF (159058.SZ) debuted on Tuesday, closing up 0.3% at 1.001 yuan with a turnover of 115 million yuan. The fund tracks the CSI All-Share Securities Companies Index, focusing on the entire A-share securities (brokerage) industry chain, covering all listed securities companies and internet wealth management platforms.

The Harvest Red Low Volatility 100 ETF (159083.SZ) also listed for the first time, closing down 0.4% at 0.995 yuan with a turnover of 21.73 million yuan. The fund tracks the CSI Red Low Volatility 100 Index, with its constituent stocks diversified across traditional defensive sectors, infrastructure, consumption, utilities, and manufacturing, representing mature, stable growth tracks.