HSBC Roadshow in Korea Shows Foreign Capital Bullish on China, But Allocation Remains on HK Internet Stocks

HSBC Qianhai Securities' recent roadshow report in South Korea, targeting over 10 institutions, shows that South Korean investors overall have a bullish view on China and are slightly overweight on Chinese assets in the MSCI Emerging Markets Index. However, their holdings are still highly concentrated in the Hang Seng Tech Index, and their awareness of the A-share AI computing power and hard-tech chain leading recently is significantly lagging. Since the second quarter, the STAR 50 and the ChiNext Index have respectively risen to the second and fifth positions in the performance of major global indices.

In the roadshow communication, the question of greatest concern to South Korean institutions is still when the Hang Seng Tech Index will bottom and rebound. HSBC believes that the answer depends on the pace of consumption recovery in the second half of the year and lists four potential catalysts: improvement in the property wealth effect, relief in downward price pressure, the spin-off of GPU businesses by internet companies to list in Hong Kong, and AI revenue growth catching up with capital expenditure growth.

Furthermore, the A-share IPOs of CX Technology and Yangtze Memory have also become a focus of attention for South Korean institutions. CX Technology's DRAM monthly production capacity has expanded from 100,000 wafers at the beginning of 2024 to 290,000 wafers by the end of 2025, and it quickly fills the gap left by Samsung and SK Hynix in the consumer electronics memory market by supplying DDR4 at a 50% discount to market price; Yangtze Memory is close to the global forefront in the NAND field, with its 270-layer 3D NAND mass production yield approaching that of leading manufacturers, and its market share has increased from 10% in the first quarter of last year to 13% in the second quarter of this year.

HSBC writes in the report:

“The two storage companies about to go public in China pose a real but asymmetric threat to Samsung Electronics and SK Hynix, that is, the disruptiveness in traditional business areas is higher than in the cutting-edge AI HBM memory sector, at least for the next 3 years.”

The report further explains this allocation bias through the differences in AI structures of the three major technology indices: STAR 50's Chinese AI computing power accounts for 62%, ChiNext Index is mainly overseas AI computing (25%), while Hang Seng Tech is highly concentrated in AI application layer internet companies, accounting for as much as 85%.

HSBC believes that STAR 50 benefits from China's cultivation of a domestic AI ecosystem, covering from upstream hardware, midstream models to downstream applications, and therefore performs slightly better than the equally strong ChiNext Index; while South Korean investors' allocations in China still mostly remain within the old framework of Hong Kong internet stocks.