In June I said I owned the wrong index, and I was leaning toward cutting it. In August, the index's own compiler agreed, in writing, and it changed my decision.
When we spoke in Shenzhen, I mentioned the problems with the Hang Seng TECH Index.
The fundamental issue is that it keeps pricing an outdated technology narrative. It represents China’s emerging industries as they were defined before 2023: renewable energy, EVs, and internet platforms.
The semiconductor and large-model companies that emerged between 2023 and 2025 fell outside what the index was designed to capture, so Hong Kong Exchanges and Clearing is now trying to correct that weakness. If we judge purely by tactical returns, 2025 belonged almost entirely to the STAR Market and ChiNext. And yes, I did buy ETFs tracking both.
Even so, I still recommend that people watch the Hang Seng TECH Index. After endless infighting among China’s auto and internet giants—the EV price war and the food-delivery subsidy war—they will eventually be forced to retreat, lick their wounds, and stop taking unnecessary losses. Weak Chinese consumption will weigh on their domestic businesses, but it will not prevent them from pursuing profits overseas. When the AI hardware bubble bursts, these established giants should benefit from a recovery in AI applications, including AI model services, robotics, and intelligent driving.
But as I write this, XPeng is down more than 9%, dragging the Hang Seng TECH Index lower again. Perhaps I should stop praising it so much. It has to take its cues from both China and the United States, so it always finds a way to disappoint.
Largely agree with Philip’s analysis and also think the Hang Seng Tech Index is still worth considering within a well-diversified China sleeve. Not just in light of the index revision but also as China's mega tech are bound to start profiting from the rising adoption of open weights models globally on the distribution/inference side
My only addition, regarding the hardware side of the AI trade, is that investors can already gain exposure through the HKEX via either 3151 (STAR 50 Index) and/or 3067 (ChiNext). Interestingly, there is no overlap between the two ETFs.
When we spoke in Shenzhen, I mentioned the problems with the Hang Seng TECH Index.
The fundamental issue is that it keeps pricing an outdated technology narrative. It represents China’s emerging industries as they were defined before 2023: renewable energy, EVs, and internet platforms.
The semiconductor and large-model companies that emerged between 2023 and 2025 fell outside what the index was designed to capture, so Hong Kong Exchanges and Clearing is now trying to correct that weakness. If we judge purely by tactical returns, 2025 belonged almost entirely to the STAR Market and ChiNext. And yes, I did buy ETFs tracking both.
Even so, I still recommend that people watch the Hang Seng TECH Index. After endless infighting among China’s auto and internet giants—the EV price war and the food-delivery subsidy war—they will eventually be forced to retreat, lick their wounds, and stop taking unnecessary losses. Weak Chinese consumption will weigh on their domestic businesses, but it will not prevent them from pursuing profits overseas. When the AI hardware bubble bursts, these established giants should benefit from a recovery in AI applications, including AI model services, robotics, and intelligent driving.
But as I write this, XPeng is down more than 9%, dragging the Hang Seng TECH Index lower again. Perhaps I should stop praising it so much. It has to take its cues from both China and the United States, so it always finds a way to disappoint.
Largely agree with Philip’s analysis and also think the Hang Seng Tech Index is still worth considering within a well-diversified China sleeve. Not just in light of the index revision but also as China's mega tech are bound to start profiting from the rising adoption of open weights models globally on the distribution/inference side
My only addition, regarding the hardware side of the AI trade, is that investors can already gain exposure through the HKEX via either 3151 (STAR 50 Index) and/or 3067 (ChiNext). Interestingly, there is no overlap between the two ETFs.
Great addition Pietro! Thanks a lot.
Thanks, I learned a lot about indexing. Never really thought how the are made up and now realize that they are all different.
Glad to hear that.