Hong Kong's major stock indices experienced a day of volatile decline, with technology stocks facing significant pressure. Gold-related exchange-traded funds (ETFs) continued their downward trend, influenced by a sharp rise in US Treasury yields.

At market close, the Hang Seng Index fell 0.65% to 24,249.29 points, with a total daily turnover of HK$288.574 billion. The Hang Seng Tech Index dropped 1.46% to 4,655.74 points.

Among major Hong Kong-listed ETFs by size, the Tracker Fund (02800) closed down 0.57% at HK$24.6. The CSOP Hang Seng China Enterprises Index Daily (2x) Leveraged Product (07709) rose 7.79% to HK$106. The Hang Seng China Enterprises Index ETF (02828) fell 1.14% to HK$84.7.

Market Performance and Gold Impact

Market performance was impacted by stronger-than-expected US May CPI data, which pushed market pricing for Federal Reserve rate cuts towards zero and sent US Treasury yields soaring. This increase in yields raises the opportunity cost of holding non-yielding assets like gold, leading to continued weakness in gold ETFs.

By the close, the CSOP Gold ETF Daily (2x) Leveraged Product (07299) was down 3.98% at HK$21.74. The Value Gold ETF (03081) fell 2.12% to HK$19.36.

An analysis from Cathay Pacific Securities suggests that in the short term, gold may maintain a volatile pattern. High oil prices are pushing inflation expectations higher, and strong US May non-farm payroll data further increase the likelihood of the Fed maintaining elevated interest rates. A strong US dollar, robust employment data, and higher interest rate expectations are likely to exert downward pressure on gold prices in the near term.

In the long run, however, gold is seen as retaining significant value for portfolio allocation. Persistent factors such as fiscal deficits, geopolitical tensions, and monetary policy concerns continue to underpin demand for gold. Against a backdrop of monetary expansion and fiscal deficit monetization, the credibility of the US dollar system faces challenges. Furthermore, frequent global geopolitical instability is driving the diversification of asset reserves, boosting demand for gold as a safe-haven asset. The global trend of "de-dollarization" is seen as potentially establishing gold as a new "pricing anchor."

Institutional Perspective

Citic Securities points out that due to geopolitical risk aversion, defensive maneuvers by domestic insurance funds have led to a significant slowdown in southbound capital inflows, particularly evident in ETF fund flows.

Nevertheless, Citic Securities anticipates that with expectations for a stabilizing economic foundation and an improving external environment, the valuation attractiveness of Hong Kong stocks is becoming prominent again. This could lead to accelerated, synchronized inflows from both domestic and foreign capital.

A note of caution is raised regarding the year's substantial HK$1.57 trillion wave of share lock-up expiries, which are highly concentrated in the second half of the year. Particularly during peak expiration periods in June-July, September-October, and December, Hong Kong's stock market liquidity may face periodic pressure.

ETF Activity

On June 11th, four new ETFs commenced trading on the exchange:

1. The Tianhong Green Power ETF (159046) debuted, closing up 0.51% at 0.984 yuan with a turnover of 62.5929 million yuan. This fund tracks the CNI Green Power Index, covering sectors such as hydropower, wind power, photovoltaics, nuclear power, and new power systems.

2. The Harvest New Energy Battery ETF (159052) began trading, closing down 1.33% at 0.962 yuan with a turnover of 15.0424 million yuan. This fund tracks the CNI New Energy Battery Index, focusing on the theme of new energy storage batteries and covering areas like battery manufacturing, energy storage inverters, and system integration.

3. The Penghua Value ETF (159037) listed for the first time, closing down 0.1% at 0.986 yuan with a turnover of 67.9648 million yuan. This fund tracks the CNI Value 100 Index, selecting leading value-oriented stocks from the Shanghai and Shenzhen markets characterized by low valuation and high dividend yield.

4. The Hwabao WP Software Development ETF (159036) started trading, closing down 3.98% at 0.942 yuan with a turnover of 33.3129 million yuan. This fund tracks the CSI All Share Software Development Index, focusing on the A-share software development and IT services sector and covering technology fields such as software development, cloud computing, and IT services.