HSBC Roadshow Feedback: Korean investors are generally bullish on the Chinese stock market, but their understanding of the STAR Market and ChiNext lags behind.

HSBC Roadshow Feedback: Korean investors are generally bullish on the Chinese stock market, but their understanding of the STAR Market and ChiNext lags behind.

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Although foreign capital continues to increase its allocation to China, a mismatch is forming between its holding structure and the most resilient sectors of the A-share market.

A recent roadshow report by HSBC Qianhai Securities presented to over ten institutions in South Korea shows that Korean investors are bullish on China and slightly overweight in the MSCI Emerging Markets Index, but their holdings remain concentrated in the pressured Hang Seng Tech Index, lagging clearly in recognizing the leading A-share AI computing power and hard tech chain.

The most pointed observation of the report is: Most Korean investors gain exposure to China via the Hang Seng Tech Index, yet few realize that since the second quarter, the STAR 50 and ChiNext Index have ranked second and fifth respectively among major global indices in performance.This means that while capital is optimistic about China, the allocation strategy is still stuck on Hong Kong internet stocks.

Roadshow Observations: Mismatch, Focus, and Framework

When will the Hang Seng Tech Index bottom and rebound? This is currently the hottest topic. HSBC believes the answer depends on the pace of consumer recovery in the second half of the year, highlighting four potential catalysts: improvement in the wealth effect of real estate, relief in downward price pressure, internet companies spinning off GPU business to list in Hong Kong, and AI revenue growth catching up with capital expenditure growth.

The A-share IPOs of Changxin Memory and Yangtze Memory are another focus.  Changxin Technology's DRAM monthly production capacity has expanded from 100,000 wafers at the start of 2024 to 290,000 by the end of 2025, supplying DDR4 at half market price, filling the gap left by Samsung and SK Hynix’s exit from the consumer electronics memory market. Yangtze Memory is closer to the global frontier in NAND, with mass production yield of 270-layer 3D NAND approaching top manufacturers, and its market share rising from 10% in Q1 last year to 13% in Q2. The report bluntly states:

"The two Chinese memory companies about to go public pose a real but asymmetric threat to Samsung Electronics and SK Hynix, i.e., their disruptive impact in traditional business is greater than in the cutting-edge AI HBM memory sector (at least for the next three years)."

The AI structural differences among the three major tech indices are described as the most insightful analytical framework. STAR 50 focuses on domestic AI computing power (62%), ChiNext Index emphasizes overseas AI computing power (25%), while Hang Seng Tech is dominated by internet companies in the AI application layer (up to 85%).

This structural difference directly explains their divergent performance since the start of the year: STAR 50 has benefited from China fostering its own AI ecosystem (from upstream hardware to midstream models to downstream applications), and its performance is slightly better than the equally strong ChiNext Index. This offers a clear guide for active allocation within China’s tech sectors.

Risk Warning and DisclaimerThe market involves risks, and investment should be prudent. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial situation, or needs of specific users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their particular circumstances. Investment based on this is at your own risk. ```