Hong Kong equities staged a rebound on Thursday, with all three major indices closing higher and the Hang Seng Tech Index leading the gains. Weighing on sentiment were overnight declines in US chip stocks and weaker-than-expected guidance from a sector heavyweight, which dragged semiconductor-related ETFs lower. Meanwhile, a dramatic reversal in market expectations for a Federal Reserve rate hike in September fueled a surge in cryptocurrency ETFs. The benchmark Hang Seng Index climbed 1.74% to close at 25,650.87 points, with total turnover reaching HK$276.857 billion. The Hang Seng Tech Index rose 2.27% to end at 4,569.8 points.
Among the top Hong Kong-listed ETFs by assets, Tracker Fund of Hong Kong (02800) closed 1.94% higher at HK$26.26, CSOP Hang Seng Tech Index ETF (03033) advanced 2.33% to HK$4.484, and Hang Seng China Enterprises Index ETF (02828) gained 2.22% to HK$88.28.
The rally in US equities, with the S&P 500 posting its best day in nearly a month, was overshadowed by a slump in chip stocks. The Philadelphia Semiconductor Index dropped as much as 2% during the session, with Broadcom tumbling over 6%. This bearish external signal directly pressured the A-share semiconductor sector. Guangfa Semiconductor Equipment ETF (560780.SH) fell 3.7% to RMB 0.964, ChinaAMC STAR Semiconductor ETF (588170.SH) declined 3.53% to RMB 0.902, and China Universal STAR Semiconductor Equipment ETF (588710.SH) slid 3.32% to RMB 0.933.
Analysts attribute the pullback to multiple factors: rising hawkish signals from the Federal Reserve have pushed US Treasury yields higher, weighing on global growth stocks with high valuations. Additionally, the semiconductor sector had accumulated significant gains in prior sessions with persistently high crowding levels, prompting profit-taking. Looking at August performance, the sector sub-segments ranked by monthly gains were analog chip design, semiconductor materials, IC packaging and testing, IC manufacturing, semiconductor equipment, and digital chip design. For September, focus shifts to areas with strong fundamental elasticity and low crowding, particularly analog power names at an earnings inflection point and those poised for adjustment following delivery disruptions. Medium-term, semiconductor equipment components and advanced packaging remain attractive.
In a dramatic shift, market pricing for a September Fed rate hike reversed course after Federal Reserve Governor Christopher Waller signaled Thursday he would support keeping rates unchanged if inflation continues to show signs of easing. According to the CME FedWatch tool, the implied probability of a September hike dropped to 50% following Waller's comments, down from 63.2% a day earlier. Bitcoin surged past $82,000 on the reduced policy pressure. Cryptocurrency ETFs rallied strongly: CSOP 2x Long MSTR ETF (07799) jumped 24.9% to HK$4.194, CSOP 2x Long Coinbase ETF (07711) soared 13.68% to HK$27.76, and ChinaAMC Bitcoin ETF (03042) climbed 3.92% to HK$9.8.
ETF analyst Eric Balchunas cautioned that Bitcoin's historical correlation with equities stands at around 0.40. The recent rise in correlations among gold, Treasuries, and stocks does not signal a shift in Bitcoin's fundamentals but rather reflects markets becoming simultaneously more macro-sensitive, he noted.
The US August nonfarm payrolls report due later today will be a key catalyst. With the ADP private payrolls figure already missing estimates, a weak official reading could further ease concerns about Fed tightening, potentially benefiting rate-sensitive sectors like gold, technology, and real estate. However, it would also reinforce worries about slowing US economic growth, dampening demand prospects for cyclical commodities such as crude oil and copper. Ongoing tensions in the Middle East add to oil price volatility. Given the mixed signals, Hong Kong markets are likely to remain range-bound in the near term.
Several new ETFs debuted today. The Huatai-PineBridge HK Connect IT ETF (526060.SH) rose 0.61% to RMB 0.993 with turnover of RMB 205 million on its first day. The fund tracks the CSI HK Stock Connect Information Technology Composite Index, with 100% exposure to the IT sector, excluding consumer and media internet asset-light companies, aligning with themes of semiconductor self-sufficiency and AI computing upgrades. The China Southern ChiNext Software ETF (158011.SZ) gained 0.6% to RMB 0.999 with turnover of RMB 134 million, tracking the ChiNext Software Index which covers software and IT services firms listed on the ChiNext board. The Hua宝 STAR Chip Design ETF (589430.SH) fell 2.74% to RMB 0.96 with turnover of RMB 37.66 million. Tracking the STAR Market Chip Design Thematic Index, its top ten holdings account for 60.97% of the portfolio, spanning four main lines: computing power, storage, interconnect and customization, and specialized sensing and SoCs.