Today (May 14), the market experienced volatile consolidation, with major A-share indices all closing in the red. The Shanghai Composite Index fell below 4200 points, and over 4300 stocks declined across the market. The combined turnover for the Shanghai, Shenzhen, and Beijing markets reached 3388.4 billion yuan, an increase of 123.9 billion yuan from the previous day, marking the seventh consecutive trading day above 3 trillion yuan.

Amid the market downturn, the banking sector stepped up as support. Major banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications all closed higher. The 10-billion-yuan bank ETF (512800) saw its on-exchange price rise 0.51% against the market trend, following a significant inflow of 237 million yuan the previous day. Supported by intensive policy measures, the pork sector rebounded, with Tianbang Food and Shennong Group hitting the daily limit. The first-ever agricultural, animal husbandry, and fishery ETF (159275) in the market closed higher. The food and beverage sector experienced a rollercoaster ride, with its ETF (515710) turning positive after a midday rally, its on-exchange price rising up to 1.5% intraday, and attracting net inflows of 15.23 million yuan over the past four days.

Driven by strong expectations for AI demand, major tech companies are accelerating their AI capital expenditure. Following their earnings reports, both Tencent and Alibaba raised their outlook. The core Hong Kong AI investment tool, the Hong Kong Internet ETF (513770), saw its on-exchange price surge up to 3.77% intraday. The Hong Kong Stock Connect Innovative Drug sector declined for three consecutive days. Driven by both overseas expansion and policy support, institutions highlight allocation opportunities. The 100% innovative drug R&D-focused Hong Kong Stock Connect Innovative Drug ETF (520880) attracted over 430 million yuan in net inflows in the past 10 days.

The red-hot optical module sector retreated after an initial surge. Stocks like Yizhongtian hit new all-time highs intraday. The ChiNext AI ETF (159363), with over 50% exposure to CPO (Co-Packaged Optics) optical modules, experienced its first pullback after a six-day winning streak and reaching a new listing high, presenting potential buying-on-dip opportunities for capital.

Major news also emerged from the equally hot chip industry chain. TSMC forecasted the global chip market size to exceed $1.5 trillion by 2030, 50% higher than previous estimates. The STAR Market Chip ETF (589190), offering full exposure to the chip industry, also consolidated and pulled back after a three-day rally and new highs. CICC believes the rally logic for STAR chips has shifted from valuation repair to earnings-driven growth.

CICC pointed out that the "924 market trend" in A-shares has persisted for nearly two years. From a medium-term perspective, they remain firmly optimistic about the A-share market continuing its upward trend with fluctuations, noting that overall valuations remain at reasonable levels. The restructuring of the international order and China's industrial innovation trends are the core drivers propelling this market rally and the revaluation of Chinese assets. The steady upward trend in A-shares since the 924 period is expected to continue.

Regarding allocation, CICC believes growth sectors will still hold an advantage in 2026, but their relative performance compared to other sectors may converge. After a three-year de-capacity cycle and the advancement of policies like "anti-involution," an increasing number of cyclical sectors are expected to benefit from a rebalancing of supply and demand. They recommend focusing on the main themes of high-growth sectors and cyclical improvement.

【ETF Insights】 This section focuses on the trading and fundamental aspects of thematic ETFs like Hong Kong Internet, Food & Beverage, and Hong Kong Stock Connect Innovative Drugs.

1. 【Exceeding Expectations Across the Board, Alibaba's AI Reaches Commercialization Inflection Point! 10-Billion-Yuan Hong Kong Internet ETF Surges 3%, Institutions Note Shift in Big Tech Valuation Logic】 Buoyed by strong earnings, Alibaba-W performed robustly, surging up to 8% in the morning session and closing up 3.84%, leading the Hong Kong internet sector to maintain gains throughout the day. The core Hong Kong AI tool, the Hong Kong Internet ETF (513770), rose over 3% intraday, closing up 0.47%.

The AI narrative for internet giants is entering an earnings validation phase. Yesterday, leading companies Alibaba and Tencent Holdings released their latest financial reports, with market focus on their AI capital expenditure and commercialization progress.

Data shows Alibaba's AI has formally entered a "commercial return cycle." External commercial revenue for Alibaba Cloud surged 40%, the fastest growth in nine quarters, with AI-related revenue accounting for 30%, marking 11 consecutive quarters of triple-digit growth. Alibaba stated that the annualized recurring revenue from AI models and application services is expected to exceed 10 billion yuan by June and triple to over 30 billion yuan by year-end. AI infrastructure investment over the next five years will far exceed 380 billion yuan, with the potential for full-stack in-house chip development.

Alibaba's U.S.-listed shares surged over 8% overnight following the report. This earnings release showcased a key breakthrough in its transformation towards an AI+cloud-driven technology platform, opening significant growth potential. The market's valuation logic for Alibaba is shifting from an "e-commerce platform" to an "AI technology company."

Tencent Holdings made significant progress in AI products. Its Hy3 preview large language model ranked first in call volume on the OpenRouter platform; WorkBuddy topped the domestic AI agent DAU (Daily Active Users) chart. Tencent revealed that more domestic chips will be deployed in the second half of the year, with capital expenditure set to increase substantially. They are considering integrating their Hunyuan model with WeChat workflows.

Guosheng Securities noted that according to the National Data Bureau, China's token consumption is experiencing exponential growth. Daily token consumption reached about 100 billion in early 2024 and surpassed 140 trillion by March 2026, a more than 1000-fold increase in two years. Both large model and application companies are poised to benefit significantly. During the intensive Q1 earnings season, core focus is on the marginal changes in CAPEX investment and AI-related revenue for major tech firms. At current low valuation levels, positive industry marginal changes could generate favorable stock price reactions.

Industrial Securities indicated that domestic computing power is currently playing catch-up relative to the North American computing chain. Hong Kong internet stocks, possessing attributes for trading domestic computing power and being early beneficiaries of AI application deployment, are expected to be a key theme for market diffusion. Additionally, from an overseas mapping perspective, cloud service providers, represented by Hong Kong internet stocks, are also likely to be a direction for subsequent catch-up in the domestic AI rally.

To capture the opportunities in 2026, the first year of AI commercialization, focus on the core Hong Kong AI tool. The Hong Kong Internet ETF (513770) and its feeder funds (Class A 017125; Class C 017126) passively track the CSI Hong Kong Stock Connect Internet Index. The top ten holdings aggregate tech giants like Alibaba-W and Tencent Holdings, along with AI application companies across various sectors, offering significant leading advantages. They support intraday T+0 trading with good liquidity.

For investors bullish on Hong Kong tech but seeking to reduce volatility, consider the first-ever Hong Kong Large Cap 30 ETF (520560). It employs a "tech + dividends" barbell strategy, holding both high-growth tech stocks like Alibaba and stable, high-dividend stocks from sectors like banking and insurance, making it an ideal core holding for long-term Hong Kong market allocation.

2. 【Food & Beverage Sector on a Rollercoaster Ride, Main Funds Accumulate Against the Trend! Huabao Food & Beverage ETF (515710) Rallies Then Retreats, Institutions See Q3 Inflection Point】 The food and beverage sector exhibited volatile swings again. The Food & Beverage ETF (515710), reflecting the sector's overall trend, traded mostly lower in the morning but suddenly turned positive in the afternoon, with its on-exchange price rising up to 1.69% intraday before retreating to close flat.

Component stocks were mixed. Gainers included Andre and Jin Da Wei, both up over 5%, with Jinzhongzi Liquor and Huijishan also among the leaders. Decliners like Sinopharm Xinyu Pharmaceutical, By-health, and Meihua Group weighed on the sector.

Fund flows showed the food and beverage sector attracted net inflows from main funds against the market trend today. Data shows that by the close, the sector received net inflows of 850 million yuan from main funds, ranking 4th among 30 CITIC primary industries. The popular on-exchange sector tool, the Food & Beverage ETF (515710), also continued to see capital inflows. Exchange data shows that as of yesterday's close, the ETF recorded net subscriptions on four out of the past five trading days, totaling 15.23 million yuan.

Dongwu Securities pointed out that the baijiu (Chinese liquor) industry entered a deep adjustment phase overall in Q2 2025, with the destocking and bottoming process expected to continue in H1 2026. The current period is critical for destocking. A new inventory cycle (price stabilization, improved restocking willingness) is anticipated in Q3 2026. Baijiu industry revenue growth is expected to be lower in the first half and higher in the second half of 2026. Healthy sector expectations may form around mid-year. They recommend focusing on relatively high-quality companies with "higher destocking credibility + leading management and operational capabilities + future growth potential logic."

From a valuation perspective, the food and beverage sector remains at low levels. Data shows that as of yesterday's close (May 13), the price-to-earnings ratio of the Sub-index for Food & Beverage, tracked by the Food & Beverage ETF (515710), was 21.76 times, at the 18.82% percentile over the past decade, highlighting attractive medium-to-long-term allocation value.

Looking ahead, Dongxing Securities believes that while the overall food and beverage industry is still bottoming, structural recovery has begun. The recovery is prioritized in the catering chain and B2B supply chain. They suggest prioritizing leading companies in pre-processed foods, beer, and condiments with strong cash flow recovery. For consumer-facing sectors with intense competition like snacks and health supplements, await the alignment of operating cash flow, cash flow quality, and profitability.

Tianfeng Securities noted that the baijiu sector is currently in a "low expectations, low holdings, low valuation, high dividend" stage. They expect the sector to enter an earnings recovery period after Q3 2026, with the recovery slope needing to track indicators like household purchasing power and economic activity. From a medium-term perspective, baijiu may still represent quality assets with stable cash flows and high dividend support.

For one-stop exposure to core food and beverage assets, focus on the Food & Beverage ETF (515710). According to China Securities Index Co., this ETF tracks the CSI Sub-index for Food & Beverage Industry Theme. Baijiu leaders account for nearly 60% of its holdings. Top ten holdings include industry giants like Kweichow Moutai, Wuliangye, Luzhou Laojiao, Shanxi Fenjiu, Yanghe, Yili, and Haitian Flavouring. Off-exchange investors can also access core food and beverage assets through the ETF's feeder funds (Class A 012548, Class C 012549).

3. 【Has the Bottom Been Reached? Capital Accelerates Accumulation, Huabao Hong Kong Stock Connect Innovative Drug ETF (520880) Units Surpass 5 Billion, Hitting Record High!】 The Hong Kong Stock Connect Innovative Drug sector opened higher but closed lower. Leading heavyweight Akeso fell 2.75%, with BeiGene, CSPC Pharmaceutical Group, and Sino Biopharmaceutical all down over 1%. The 100% innovative drug R&D-focused Hong Kong Stock Connect Innovative Drug ETF (520880) fell 2.3% on high volume for its third consecutive decline, with an intraday amplitude of 3.55% and turnover of 331 million yuan.

Amid the sector's consecutive adjustments, the 520880 ETF continued to trade at a premium on-exchange, with a closing premium rate of 0.52%, indicating active buying interest. Over the previous 10 trading days, it attracted cumulative net subscriptions exceeding 430 million yuan. With capital inflows, the units outstanding for the Hong Kong Stock Connect Innovative Drug ETF (520880) rose to 5.124 billion, setting a new record high!

What factors are driving the recent acceleration in capital accumulation? From an industry perspective, China's innovative drug development is advancing rapidly. Recently, Hengrui Medicine's $15.2 billion global collaboration with BMS marked another milestone in the globalization of China's innovative drug industry. Insight Database shows that from January to April 2026, the total value of out-licensing deals for Chinese innovative drug molecules reached $55.6 billion, already achieving 39.7% of last year's total.

On the policy front, the National Healthcare Security Administration recently released the "Work Plan for Adjusting the 2026 National Basic Medical Insurance, Maternity Insurance, Work Injury Insurance Drug List and Commercial Health Insurance Innovative Drug List (Draft for Comments)," introducing a "pre-application" mechanism for the first time. This adjustment effectively provides innovative drug companies with an accelerated pass for entering the national reimbursement drug list.

In the secondary market, the Hong Kong Stock Connect Innovative Drug sector entered a phase of adjustment last September, lasting about eight months. The underlying index for the Hong Kong Stock Connect Innovative Drug ETF (520880) has declined over 23% during this period, indicating a relatively full adjustment and highlighting investment value.

Note: The historical annual returns for the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index from 2021 to 2025 were: -22.72%, -16.48%, -19.76%, -14.16%, and 66.32%. Past performance does not guarantee future results.

With a solid investment logic and relatively full adjustment, to position for a potential rebound, consider these two investment tools: For pure innovative drug exposure, choose the Hong Kong Stock Connect Innovative Drug ETF (520880). It offers 100% exposure to innovative drug R&D companies, with the top ten holdings accounting for over 70%, showcasing strong leading attributes. Its underlying assets are Hong Kong-listed stocks, offering high volatility and T+0 trading.

For investors seeking to reduce volatility, opt for the only on-exchange Pharmaceutical ETF (562050). Its unique "70% innovative drugs + 30% traditional Chinese medicine" allocation is a scarce market offering, combining the high growth of innovative drugs with the high dividends of traditional Chinese medicine.

Note "The only on-exchange Pharmaceutical ETF Huabao (562050)": According to Shanghai and Shenzhen Stock Exchange data, as of the current date, this ETF is the only one tracking the CSI Pharmaceuticals Index in the market.

Note ①: Please refer to each fund's legal documents for specific fee details. Note ②: The "first-ever agricultural, animal husbandry, and fishery ETF (159275)" refers to the first ETF tracking the CSI All Share Agriculture, Animal Husbandry and Fishery Index. Source: Shanghai and Shenzhen Stock Exchanges, etc., as of May 14, 2026. Reminder: Recent market volatility may be significant. Short-term price movements do not indicate future performance. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position and risk management.

*Institutional views referenced from: ① CICC report "May Industry Allocation: The Fork in Expectations and Verification" dated May 6; ② CICC report "How High is the New Historical High?" dated May 14; ③ Guosheng Securities report "Focus on Hong Kong Q1 Earnings, Bullish on AI Token Economy" dated May 11; ④ Industrial Securities Strategy report "AI Diffusion, Don't Forget Hang Seng Tech" dated May 7; ⑤ Dongwu Securities report "Baijiu 2025 Annual Report & 2026 Q1 Report Summary: Destocking Accelerates, Bottom Becomes Clearer" dated May 12; ⑥ Dongxing Securities report "Food & Beverage Industry: Viewing Recovery Trends from Free Cash Flow" dated May 13; ⑦ Tianfeng Securities report "Signals of Baijiu Bottoming Gradually Appear, Monitor Seasonal Shift for Beer & Beverages" dated May 12.

Risk Disclosures: The Hong Kong Internet ETF passively tracks the CSI Hong Kong Stock Connect Internet Index (Base Date: Dec 30, 2016; Release Date: Jan 11, 2021). The Hong Kong Large Cap 30 ETF passively tracks the Hang Seng China (Hong Kong Listed) 30 Index (Base Date: Jan 3, 2000; Release Date: Jan 20, 2003). The Bank ETF passively tracks the CSI Bank Index (Base Date: Dec 31, 2004; Release Date: July 15, 2013). The Food & Beverage ETF passively tracks the CSI Sub-index for Food & Beverage Industry Theme (Base Date: Dec 31, 2004; Release Date: April 11, 2012). The Agricultural, Animal Husbandry and Fishery ETF passively tracks the CSI All Share Agriculture, Animal Husbandry and Fishery Index (Base Date: Dec 31, 2004; Release Date: Dec 12, 2016). The ChiNext AI ETF passively tracks the ChiNext Artificial Intelligence Index (Base Date: Dec 28, 2018; Release Date: July 11, 2024). The Hong Kong Stock Connect Innovative Drug ETF passively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Selection Index (Base Date: Dec 31, 2020; Release Date: July 17, 2023). The Pharmaceutical ETF passively tracks the CSI Pharmaceuticals Index (Base Date: Dec 30, 2011; Release Date: July 15, 2013). The STAR Market Chip ETF passively tracks the SSE STAR Market Chip Index (Base Date: Dec 31, 2019; Release Date: June 13, 2022). Index constituent stocks are adjusted according to the respective index compilation rules. Their past performance does not guarantee future results. Stocks mentioned are for illustrative purposes only as index constituents, not as individual stock recommendations, and do not represent the investment direction of the fund manager or the fund. Any information herein is for reference only. Investors are responsible for their own investment decisions. The views, analysis, and forecasts herein do not constitute investment advice. The fund manager is not liable for any direct or indirect losses arising from the use of this content. Investors should read the Fund Contract, Prospectus, Fund Product Key Facts Statement, and other legal documents to understand the fund's risk-return characteristics and choose products suitable for their own risk tolerance. Past fund performance does not guarantee future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Based on the fund manager's assessment, the Bank ETF, Food & Beverage ETF, Agricultural, Animal Husbandry and Fishery ETF, and Pharmaceutical ETF are rated R3-Medium Risk, suitable for Balanced (C3) and above investors. The Hong Kong Internet ETF, Hong Kong Large Cap 30 ETF, ChiNext AI ETF, Hong Kong Stock Connect Innovative Drug ETF, and STAR Market Chip ETF are rated R4-Medium to High Risk, suitable for Aggressive (C4) and above investors. Suitability matching opinions are subject to the sales institution. Sales institutions assess these funds per relevant regulations. Investors should refer to the fund manager's suitability opinions. Suitability opinions may differ among sales institutions, and a sales institution's risk rating cannot be lower than the fund manager's. Risk-return characteristics and risk ratings in the fund contract may differ due to different assessment factors. Investors should understand the fund's risk-return profile and choose fund products prudently based on their investment objectives, horizon, experience, and risk tolerance, bearing the associated risks. CSRC registration of these funds does not indicate substantive judgment or guarantee of their investment value, market prospects, or returns. Fund investment involves risks.