The Hong Kong stocks in the Network Technology sector continue their recent strong performance, but can they still be invested in amid the delivery subsidy war?

Published 16 hours ago• 6 minute read

Under the drag of the takeaway subsidy war, can Hong Kong internet technology stocks still be invested in?

On July 16, Hong Kong stock market star Network Technology stocks continued their strong recent performance, as of the time of writing. $BIDU-SW (09888.HK)$ 、 $TRIP.COM-S (09961.HK)$ rising nearly 4%. $BABA-W (09988.HK)$ Up 3%, $KUAISHOU-W (01024.HK)$ 、 $BILIBILI-W (09626.HK)$ 、 $MEITUAN-W (03690.HK)$ 、 $JD-SW (09618.HK)$ 、 $TENCENT (00700.HK)$ Followed by a collective rise.

However, the ultra-low prices brought about by the takeaway subsidy war have temporarily benefited consumers, increased orders for merchants, and boosted earnings for delivery riders. Yet, for ordinary investors in the stock market, concerns about stock prices are rising, as multiple large-cap Hong Kong stocks in the Technology sector have faced consistent net outflows for two consecutive months. Can Internet Technology stocks still be invested in amidst the takeaway war's drag?

In this regard, several private equity institutions have recently stated that although high subsidies are not sustainable, the low stock prices of internet technology companies also provide good odds, while AI can still promote the industry, significantly reducing the risks of technological disruption and the reconstruction of internet traffic entry points. Internet platform companies can explore the future development space brought about by AI more comfortably under the protection of ecological stickiness, further enhancing ecological stickiness. They represent a type of asset that can both advance and retreat, and the Hong Kong technology sector has entered a configuration window.

Currently, the takeaway market is in fierce competition. $MEITUAN-W (03690.HK)$ 、 $JD.com (JD.US)$ 、 $BABA-W (09988.HK)$ As major Internet and Technology giants are investing heavily, attempting to dominate this field through subsidy wars, technological upgrades, and ecosystem layouts. Goldman Sachs' research reports indicate that in the second quarter of this year alone, these three companies' investments in the aforementioned areas reached 25 billion yuan.

The takeaway delivery battle has caused concerns to rise among ordinary investors, resulting in Outflow from the Hong Kong stock Technology Sector. According to data from the Hong Kong Stock Exchange, mainland investors net sold a total through "Hong Kong Stock Connect" in June. $TENCENT (00700.HK)$ 、 $BABA-W (09988.HK)$ And $XIAOMI-W (01810.HK)$ Stocks reached 46.4 billion Hong Kong dollars, and these three large Technology stocks have experienced net selling for the second consecutive month, also being the three most sold stocks by southbound funds this year. This capital outflow is mainly due to investors' concerns over intensified e-commerce competition, prompting the fast realization of profits after an earlier rebound in Technology stocks, resulting in the Hang Seng TECH Index significantly lagging behind the broader market since April.

As time passes, market views are also quietly changing. On July 15, the three major indices of the Hong Kong stock market opened high and rose collectively, with the Hang Seng Index up by 1.6% and the Hang Seng TECH Index up by 2.8%. Among them, Bilibili rose over 7%, Alibaba rose over 6%, and MEITUAN-W rose over 4%.

Meanwhile, the trading volume of major Technology Index ETFs has surged significantly. The largest in the A-share same sector. $ChinaAMC Hang Seng Tech Index ETF (513180.SH)$ Net asset value once touched a nearly 20-day high, with a trading volume of 7.48 billion yuan, setting a new high since the so-called "equal tariff" policy in mid-April in the United States. $CAMC HS Sci-Tech ETF QDII (513330.SH)$ With a management scale exceeding 23 billion yuan, the trading volume surpassed 4.6 billion yuan, also setting a new high since mid-April.

A report by Invesco shows that 60% of global sovereign wealth funds plan to increase their allocation to Chinese Assets, with the proportion in North America reaching 73%. The report highlights that global sovereign wealth funds are shifting toward active fund management, investing in China, and implementing diversified reserve strategies to cope with a turbulent global environment. In particular, interest in Chinese Assets is significantly rebounding, with nearly 60% of funds planning to increase their allocation to China in the next five years, especially in the Technology sector.

"In terms of allocation direction, the current valuation of Technology stocks is at a fair level after experiencing a wave of revaluation," said Xuanyuan Investment, a private equity firm with billions in assets under management. The market liquidity is relatively ample, and there is a certain phenomenon of asset scarcity, thus attention should be closely paid to the CAPEX and related business statements of leading Internet companies in the second quarter.

Currently, both the Hang Seng Internet & Information Technology Index and the Hang Seng TECH Index are at relatively low valuation levels. Among them, the valuation of the Hang Seng Internet & Information Technology Index is 17.84 times, at the 25th percentile level; the valuation of the Hang Seng TECH Index is 20.1 times, also at the 25th percentile level.

Cai Haihong, founder and chief investment officer of Ruipu Investment, shared the latest perspectives on e-commerce platforms at the recent mid-year strategy meeting. Cai Haihong stated that while the barriers to entry for e-commerce platform businesses are not as robust as those for social networking platforms, they may continue to face competition from video platforms, low-cost platforms, and instant retail fields. However, through management adjustments, focusing on core businesses, and clarifying positions, the company has also achieved certain results.

The second growth curve for e-commerce platform companies, that is, the key judgment point, lies in AI. Open-source is gradually becoming the mainstream development direction for large AI models. In the future, the competition focus of Technology platform companies will no longer be limited to the performance of large models, but will shift to breakthroughs in application scenarios and business models, meaning moving from "having good models" to "effectively utilizing the models and achieving commercial monetization." They seize the opportunity of "AI equality" while significantly reducing the previous risks posed by self-developed closed-source large model performance not being competitive enough, which could face technological disruption and reconstruction of Internet traffic entrances. Therefore, Internet companies can more confidently explore future development space under the protection of ecological stickiness. E-commerce leaders continue to decisively invest in the underlying technologies of cloud computing and AI while maintaining a leading position, and the next step requires more explosive breakthroughs and implementation of AI applications and business models.

Yu Xiaochang, research director at Gathering Capital, believes that some Internet companies face intensified competition in their fields, and high subsidies are not sustainable. However, the depressed stock prices also provide good odds, while AI can still promote the Industry, making it a type of asset that is "offensive and defensive." Currently, the development of AI in China has not stagnated; it simply lacks particularly popular applications. This is quite similar overseas, where it presents as widespread applications and penetration. The Industry is constantly evolving and changing, and as it accumulates to a certain extent, it will naturally manifest. As market sentiment gradually warms up, investment in the Technology sector is also entering a configuration window period.

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