Focus on Hong Kong AI Hard Tech: Investment Value Analysis of China Asset Management Hong Kong Stock Connect IT ETF

Keywords: Hong Kong Stock Connect, IT ETF, hard tech, semiconductor, AI PC, STAR Market

Introduction: When Tech Waves Meet Hong Kong Opportunities

Against the macro backdrop of global digital transformation and accelerating AI industry penetration, the tech sector has always been one of the most watched tracks in capital markets. However, Hong Kong stocks have long been seen by investors as "the realm of traditional finance and internet giants," with their deep hard tech value often overshadowed by large-cap internet companies like Alibaba, Tencent, and Meituan. Since 2025, with the explosion of AI computing demand, deepening process of domestic semiconductor substitution, and accelerating terminal iteration, a group of Hong Kong-listed "hard-core" tech companies focused on hardware manufacturing, chip design, and advanced packaging have emerged, attracting systematic revaluation by institutional capital.

In this structural shift, the Huabao Hong Kong Stock Connect IT ETF (code: 159131, off-market feeder fund code: 026755), with its unique index compilation and precise target positioning, has become the first and largest Hong Kong IT theme product by scale and liquidity. It does not chase internet giants but concentrates on a hard tech combination of "semiconductors + electronics + computer software," providing investors with a tool to directly participate in the Hong Kong AI hardware ecosystem.

I. Fund Overview: Market's First Hard Tech "Gravity"

The full name is "China Asset Management Hong Kong Stock Connect Information Technology Exchange Traded Open-End Index Securities Investment Fund." Its underlying index consists of "80% hardware + 20% software," a weight distribution that is highly distinctive—unlike most tech indices that heavily tilt toward software and application companies, it reverses that trend, allocating the core weight to hardware companies with physical assets, tech barriers, and heavy production assets.

Among similar products in the market, this ETF ranks top in daily average turnover and scale, meaning investors enjoy smaller bid-ask spreads and higher capital efficiency when trading on the secondary market. For institutional investors, ample liquidity is a prerequisite for allocation; for individual investors, the off-market feeder fund provides a convenient channel to invest in Hong Kong hard tech without a securities account.

II. Core Index: 80% Hardware Intensity Configuration Logic

Why "80% hardware"? This proportion is not random. In the value distribution of the AI industry chain, the hardware layer (including computing chips, memory chips, PCB substrates, thermal modules, precision structural parts, etc.) accounts for over 60% of cost structure. With the exponential growth of AI model parameters, hardware performance requirements have shifted from "adequate" to "demanding." The Hong Kong market happens to host a number of globally competitive hardware companies—SMIC and Hua Hong Grace as the two largest mainland China wafer foundries together account for over 26% of the index weight; Lenovo Group, the global PC market leader and first to launch AI PCs, has a weight of over 10%; and the dual leaders Kingboard Holdings and Kingboard Laminates in electronic glass beads and copper clad laminates combine for over 11%.

Importantly, these three types of constituents have the highest content in any index with derivative products in the entire market. For example, SMIC's weight in most ETFs is usually less than 5%, but here it exceeds 13%; Lenovo often ranks low in traditional tech indices due to being squeezed by internet giants, but here it occupies the largest single weight. This "hard tech first" compilation approach allows the index to more purely reflect the prosperity cycle of Hong Kong's manufacturing sector.

The chart above shows the industry distribution of the ETF's underlying index: semiconductors (wafer foundry) the largest weight segment, followed by electronics hardware (PCB, structural parts, cooling), computer hardware (AI PCs, servers) third, and software & apps only 20%, excluding internet giants like social platforms, e-commerce, and gaming.

III. Constituent Analysis: Three Core Driving Sectors

1. Semiconductor Foundry Dual Engines: SMIC and Hua Hong Grace

SMIC is mainland China's most advanced and largest integrated circuit foundry, with mature mass production of 14nm and 28nm processes, and continuous breakthroughs in advanced packaging. Since 2025, as demand from domestic chip design companies recovers, its capacity utilization has risen above 90%. Hua Hong Grace has unique advantages in specialty processes (e.g., BCD, eNVM, IGBT) and benefits from surging power semiconductor demand from new energy vehicles and industrial automation.

Combined weight over 26% means this ETF has significantly higher exposure to the semiconductor foundry segment than peers. If future AI inference chips migrate to the edge, or mobile and automotive SoC orders shift to mainland foundries, this ETF will directly benefit from rising capacity utilization and foundry prices.

2. AI PC Pioneer: Lenovo's Strategic Position

2024 was dubbed the first year of AI PCs. Lenovo was first to launch consumer-grade products integrating NPUs and deeply cooperated with Microsoft and Qualcomm to deploy large model capabilities locally. As the global PC leader, Lenovo has barriers in supply chain management, channel penetration, and brand influence. The ETF gives Lenovo over 10% weight, effectively betting on the deterministic trend of an AI terminal replacement cycle.

3. PCB Dual Leaders: Kingboard Holdings and Kingboard Laminates

PCB is the mother of electronic systems, and CCL (copper clad laminate), as the core substrate of PCB, directly determines high-frequency signal transmission quality. Kingboard Holdings is one of the world's largest CCL producers; its subsidiary Kingboard Laminates holds a significant share in high-end CCL. With surging demand for high-layer, high-density PCBs from AI servers, 5G base stations, and data centers, both companies' product prices and shipments have grown significantly, contributing 11% combined weight as important drivers of index performance.

IV. Latest Rebalancing: Adding New Hard Tech Stars, Sharpness Boosted

On June 15, 2025, the underlying index underwent a semi-annual rebalancing, adding several new hard tech companies such as Zhipu, Biren Technology, and Shenghong Technology. Each is representative:

• Zhipu: Specializes in AI vision processing chips, with customer adoption in autonomous driving and surveillance.
• Biren Technology: A GPU design upstart, with competitive general-purpose GPU products in AI training and inference.
• Shenghong Technology: A multi-layer high-density PCB manufacturer deeply tied to server and telecom equipment leaders.

After rebalancing, the total number of constituents remains 60, but poorly performing or fundamentally deteriorating stocks have been removed, further improving overall quality. Notably, the index does not include large-cap internet companies like Alibaba, Tencent, or Meituan, meaning its performance diverges significantly from the traditional Hang Seng Tech Index. When the internet sector is under pressure from regulation or competition, this ETF could rise independently on the back of hardware prosperity.

V. Investment Value: Why Suitable for Today?

At the current juncture, Hong Kong hard tech faces three favorable factors:

• Valuation discount: Compared to A-share hard tech peers, Hong Kong semiconductor and hardware companies generally trade at a 20%-30% discount;
• AI industry chain spillover: Domestic AI model training demand boosts orders for computing chips and memory, with SMIC and Hua Hong being direct beneficiaries;
• Consumer electronics recovery: AI PCs, AI phones, and smart wearables may kick off a new hardware innovation cycle, benefiting Lenovo, Kingboard, etc.

With its clear "80% hardware + 20% software" positioning, this ETF offers pure hard tech exposure. For investors bullish on China's semiconductor autonomy, electronics manufacturing upgrading, and AI hardware explosion, it is an efficient tool to allocate to Hong Kong hard tech leaders in one click.

Conclusion

The China Asset Management Hong Kong Stock Connect IT ETF (159131) and its off-market feeder fund (026755), with its market-first hard tech index compilation, covers core Hong Kong hard tech companies such as SMIC, Hua Hong Grace, Lenovo Group, and the Kingboard family, forming three pillars: "wafer foundry + AI PC + high-end PCB." After the latest rebalancing, the addition of new stocks like Zhipu and Biren further enhances the index's sharpness. In the trend of AI moving from cloud to edge, this ETF is poised to be a flagship tool for investors to capture the Hong Kong AI hard tech rally.

Risk disclaimer: This content is based on public information and does not constitute investment advice. Fund investments carry risks; past performance is not indicative of future results. Investors should make prudent decisions based on their own risk tolerance.