Hang Seng Index Opens 0.83% Higher; Semiconductor Sector Plunges
Taylor Wilson
The Hang Seng Index opened up 0.83% on July 2 while the Hang Seng Tech Index gained 1.25% — yet semiconductor stocks sold off hard, led by GigaDevice's 12%+ drop. Money isn't leaving Hong Kong equities; it's rotating out of chip names.
How bad was the semiconductor sell-off?
GigaDevice (03986) fell over 12%, Hua Hong Semi dropped over 7%, Montage Technology lost over 6%, and SMIC (中芯国际) slid over 5%.
This means → the sell-off was broad-based across chip stocks, not an isolated name.
The broader market opened nearly 1% higher the same morning. In plain terms = capital didn't exit Hong Kong — it moved from chips to other sectors.
Where is the money going?
Huatai Securities flagged two short-term plays: media stocks with heavy short interest but stabilising earnings (an oversold-bounce trade), and high-dividend bank stocks (a defensive trade).
On a medium-term view, Huatai still favours semiconductors, new energy, and machinery — plus select food and beverage names.
This means → institutions haven't abandoned the semiconductor thesis mid-term, but they're stepping aside short-term until selling pressure clears.
What will drive Hong Kong earnings in the second half?
Galaxy Securities expects 2026 Hong Kong-listed earnings to continue a structural recovery, with overall growth improving from 2025 — but divergence remains the defining theme.
The main earnings drivers are three tracks: AI supply chain, upstream resources, and select high-growth sectors.
A full recovery in traditional consumption and property chains still needs clearer macro signals, Galaxy says — in plain terms = those two sectors have no visible inflection point yet.
Why is innovative pharma called out separately?
CITIC Construction Investment notes that national health-insurance negotiations plus a new commercial-insurance innovative-drug formulary — a reimbursement list set up specifically by private insurers for novel drugs — are creating a dual-engine boost to drug accessibility.
The commercial-insurance formulary, launched for the first time in 2025, could widen the volume ramp for innovative drugs.
This means → innovative drugs are no longer reliant on a single payer (government insurance); the commercial formulary opens a second revenue channel for drugmakers.
Chips down short-term but favoured mid-term — how to read the contradiction?
The short-term selling pressure comes from structural rotation: the broad market rose while the sector fell, signalling profit-taking rather than systemic risk.
Multiple brokerages still list semiconductors as a medium-term allocation in accelerating-growth sectors — the thesis is intact.
This reflects a market stuck in a "buy the trend, but balk at the price" phase — whether semiconductor stocks stabilise from here is the next key test for the market.
Content is for reference only, not financial advice.