The Hong Kong stock market opened lower and extended its losses today, with the three major indices declining once more. South Korean financial authorities issued strong signals to stabilize the market, leading to a broad retreat in related ETFs. Meanwhile, the coal sector extended its gains for several consecutive days, driven by El Niño concerns and expectations of peak summer power demand. At the close, the Hang Seng Index fell 1.48% to 25,253.4 points, with a total turnover of HK$270.23 billion. The Hang Seng TECH Index dropped 1.61% to 4,975.36 points.

Among major Hong Kong-listed ETFs by size, the Tracker Fund of Hong Kong (02800) closed down 1.54% at HK$25.54. The CSOP Hang Seng TECH Index Daily (2x) Leveraged Product (07709) fell 9.37% to HK$132.5. The Hang Seng China Enterprises Index ETF (02828) declined 1.2% to HK$87.44.

Sector Performance Overview

South Korean Financial Authorities Signal Market Support, Related ETFs Fall

South Korean financial authorities released strong signals to stabilize the market on June 4th, causing a full-line retreat in related ETFs. By the close, the CSOP Samsung Daily (2x) Leveraged Product (07747) plunged 9.94% to HK$214.8. The CSOP Hang Seng TECH Index Daily (2x) Leveraged Product (07709) dropped 9.37% to HK$132.5. The TR Korea ETF (02848) fell 4.86% to HK$2,036, and the CSOP Hong Kong-Korea Technology ETF (03431) decreased 4.35% to HK$11.66.

The South Korean Finance Minister expressed concern over the increase in leveraged equity investments, stating that actions would be taken to address "herd behavior" in financial markets. He also noted that foreign investors adjusting their portfolios was one factor contributing to volatility in the South Korean stock market. Market observers widely believe that short-term overheating sentiment and exchange rate fluctuations in the KOSPI index may intensify intraday volatility. Influenced by this news, the KOSPI Composite Index fell over 2% during the session, dragging down related ETFs.

A recent Goldman Sachs research report raised its target for the KOSPI Composite Index from 9,000 points to 12,000 points, stating that as long as corporate earnings maintain strong growth, the market would be well-supported. However, Goldman Sachs also cautioned that the South Korean stock market has more than doubled this year, with Samsung Electronics and SK Hynix now accounting for over half of the total market capitalization. With retail speculative activity heating up, the market is prone to corrections.

El Niño and Peak Summer Demand Expectations Fuel Continued Gains in Coal Sector

By the close, the Guotai Coal ETF (515220) rose 2.14% to 1.43 yuan. The ETF's price has accumulated a maximum gain of nearly 20% over the past week of trading. The coal sector's recent trading logic has been strong, influenced by the formal implementation of the fifth round of domestic coke price hikes and high-temperature expectations brought by the El Niño phenomenon.

Market analysis suggests that with the summer electricity consumption peak approaching, demand expectations for thermal coal are heating up. Additionally, the high-dividend characteristics of coal stocks highlight their defensive attributes in a volatile market. Founder CIFCO Futures indicated that coal prices are likely to remain strong, and it is necessary to closely monitor the progress of mine resumptions and changes in actual production. Currently, it is not the peak season for coal consumption. However, during the annual peak summer period from July to August, increased coal demand driven by thermal power leads to price increases, potentially further tightening supply and demand.

Founder Securities pointed out that coal prices are gradually rising from 2026, subsequently driving up the share prices of the coal sector. Overall, the current coal market presents a tight balance characterized by steadily recovering demand and dual pressure on both domestic and international supply. Judging from the core factors on both the supply and demand sides, the subsequent price center for coal is highly likely to steadily rise. The investment focus is on coal chemicals and elasticity. With geopolitical conflicts causing high and volatile oil prices, coal prices are stable with some weakness, and the high-profit cycle for coal chemicals is expected to continue.

Institutional Perspectives

Guosen Securities believes that the earnings downgrades for the Hang Seng TECH Index that originated in June of last year have stabilized. Regarding semiconductors and AI hardware, sectors represented by Hong Kong Stock Connect information technology, including AI PCs, semiconductors, hardware, and electronic components, significantly outperformed the index in May. Their offensive logic is based on expectations that overseas AI capital expenditure will be further revised upward in the second quarter of 2026. On the other hand, leading Hong Kong-listed internet companies are successively releasing AI products. After half a year of adjustments, both market expectations and valuations for these companies are relatively low. The subsequent focus will be on the performance of their models.