On May 27th, the Hong Kong stock market witnessed a net outflow of HK$7.717 billion from northbound capital via the Stock Connect program. Specifically, the Shanghai-Hong Kong Connect saw a net inflow of HK$1.614 billion, while the Shenzhen-Hong Kong Connect experienced a significant net outflow of HK$9.332 billion.

The top recipients of northbound net buying were SMIC (00981), XIAOMI-W (01810), and MONTAGE TECH (06809). Conversely, the stocks with the largest net outflows were BABA-W (09988), Tracker Fund (02800), and CSOP Hang Seng Tech ETF (03033).

A divergence was observed among semiconductor stocks. SMIC (00981) and MONTAGE TECH (06809) attracted net purchases of HK$1.981 billion and HK$99.63 million, respectively. In contrast, HUA HONG SEMI (01347) faced a net sell-off of HK$353 million. This activity follows analysis from Daiwa, which highlighted that Huawei's HiSilicon Tau Scaling Law is fundamentally based on 3D IC principles, aimed at enhancing system-level performance by reducing communication latency and signal propagation. While 3D packaging was already known as a key direction for China's semiconductor industry, HiSilicon's formal announcement was seen as a positive surprise, indicating breakthroughs in both design and manufacturing. The firm reiterated its optimistic view on China's semiconductor supply chain.

XIAOMI-W (01810) secured a net purchase of HK$806 million. The company recently released its Q1 results, reporting revenue of RMB 99.14 billion, slightly exceeding market expectations, and an adjusted net profit of RMB 6.1 billion. Revenue from innovative businesses approached RMB 20 billion. The automotive segment is currently in a product transition phase, with new SU7 and YU7 models already launched. The average selling price (ASP) for smartphones reached a record high, and the gross margin for the IoT segment improved significantly quarter-over-quarter. Concurrently, the company announced a HK$20 billion share buyback plan.

GIGADEVICE (03986) received a net inflow of HK$70.48 million. This follows news that ChangXin Memory Technologies (CXMT) passed its review for a listing on Shanghai's STAR Market. According to CXMT's IPO prospectus, GIGADEVICE currently holds a 1.8% stake in CXMT. Zhu Yiming, Chairman of GIGADEVICE, also serves as Chairman of CXMT. Notably, a company filing showed that between May 11th and May 25th, Zhu Yiming reduced his stake in GIGADEVICE by approximately 6.3299 million shares, representing about 0.90% of the company's total shares, through centralized bidding and block trades.

CNOOC (00883) saw a net outflow of HK$261 million. Market attention is on a key juncture in US-Iran nuclear negotiations, with the outline of a preliminary agreement draft becoming clearer. Iran stated that the possibility of a renewed war with the US is "low," but its armed forces are "fully loaded" and ready for combat. Optimism surrounding a potential US-Iran deal drove oil prices sharply lower, with WTI crude falling 4.0% intraday and Brent crude down 3.5%.

TENCENT (00700) and BABA-W (09988) faced substantial net outflows of HK$1.122 billion and HK$1.857 billion, respectively. Both tech giants have signaled increased capital expenditure in AI. TENCENT's single-quarter AI-related spending hit a new high of RMB 37 billion, while Alibaba clarified that its future investments will significantly exceed the previously planned RMB 380 billion. Guolian Minsheng Securities noted that AI commercialization has entered a verification phase, with the competitive focus shifting from technology and computing power expansion to a capital-intensive competition centered on the efficiency of capital expenditure.

Northbound capital engaged in a broad sell-off of Hong Kong ETF products. Tracker Fund (02800), CSOP Hang Seng Tech ETF (03033), and iShares Core Hang Seng China Enterprises ETF (02828) recorded net outflows of HK$1.828 billion, HK$1.392 billion, and HK$1.379 billion, respectively. Guoyuan International posits that in the short term, the continuous expansion of AI infrastructure demand supports the semiconductor sector. However, as valuations keep rising, the sensitivity of related sectors to negative news will increase. Currently, the tone within the US Federal Reserve is more neutral-to-hawkish. While an immediate rate hike is less likely, it cannot be entirely ruled out. Any unexpectedly hawkish signals in the future could amplify market valuation adjustment pressures.

In other trading activity, RADIANCE HLDGS (09993) received a net purchase of HK$77.34 million, while YOFC (06869) suffered a net outflow of HK$316 million.