Analysis of the Sustainability of the Strong Performance of the Hong Kong Stock Semiconductor Sector and Its Impact on the Valuation Recovery Landscape

Based on the latest market data and in-depth analysis, I provide you with a comprehensive research report on the sustainability of the strong performance of the Hong Kong stock semiconductor sector and its impact on other sectors.

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In 2025, the net inflow of southbound capital into the Hong Kong stock market reached

, setting a historical record for annual net inflows. After entering 2026, southbound capital continues to maintain a buying trend. As of January 13, the cumulative net inflow reached , with net inflows recorded in 6 out of 7 trading days[1][2].

From the perspective of capital holding structure, southbound capital has the highest market value of holdings in the three industries of

, reaching HK$1.616649 trillion, HK$1.320345 trillion, and HK$905.974 billion respectively[2]. Notably, the information technology sector (including semiconductors) has become the second largest overweight sector for southbound capital, reflecting mainland investors’ strong preference for Hong Kong-listed technology growth stocks.

Among the 237 trading days in 2025, southbound capital recorded net inflows in

, accounting for more than 80% of the total. The peak single-day net inflow occurred on August 15, reaching HK$35.876 billion[1][2]. This continuous and intensive inflow pattern indicates that southbound capital is not a short-term speculative behavior, but a strategic choice based on medium- to long-term allocation.

Industry	Market Value of Holdings (HK$100 million)	Percentage of Southbound Capital
Financials	16,166.49	25.5%
Information Technology	13,203.45	20.9%
Consumer Discretionary	9,059.74	14.3%
Health Care	4,500+	7.1%
Communication Services	4,500+	7.1%

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The strong performance of the semiconductor sector first benefits from

. The Ministry of Industry and Information Technology clearly proposed to tackle “bottleneck” technologies such as CPUs and high-performance AI servers, and the “domestic products for domestic use” policy requires that key chips for 5G and 6G prioritize domestic alternatives[3]. This policy orientation has directly boosted market confidence in the domestic semiconductor industry and provided clear market demand guarantees for related enterprises.

From the perspective of industrial policy evolution, 2026 is the first year of the “15th Five-Year Plan”, and semiconductor self-reliance and controllability have been elevated to a national strategic level, and it is expected to receive continuous policy dividends and capital support.

The domestic semiconductor industry chain has achieved substantive breakthroughs in multiple key links[3]:

• Equipment Segment
  : Domestic etching machines and thin film deposition equipment have successfully entered the supply chain of top international wafer fabs
• Material Segment
  : The localization rate of key materials such as photoresist and high-purity target materials continues to increase
• Cutting-edge Technology
  : A breakthrough has been made in EUV lithography machine prototype technology. Although there is still a long way to go from the laboratory to mass production, it has broken the expectation of foreign technological monopoly

Semiconductor Manufacturing International Corporation (0981.HK), as the leader of the Hong Kong stock semiconductor sector, its technological progress is particularly eye-catching. The company’s current stock price is

, with a 52-week trading range of HK$34.50-HK$93.50, and a market capitalization of HK$605.23 billion[4]. The one-year increase is as high as , significantly outperforming the broader market.

The full-scale outbreak of downstream demand is the demand-side foundation for the strong performance of the semiconductor sector[3]:

• AI Server Expansion
  : Drives a surge in demand for HBM high-bandwidth memory and enterprise-level SSDs, with prices of related chips continuing to rise
• New Energy Vehicles
  : Automotive-grade chips and sensors are in short supply, and the increase in penetration rate has doubled chip usage
• Humanoid Robots
  : Emerging application scenarios open up a second growth curve
• Overseas Market Expansion
  : Domestic semiconductor enterprises have steadily increased their overseas market share relying on cost-performance advantages and localized services

From the perspective of capital flow, SMIC has become one of the top holdings of southbound capital, with a holding market value of over

, and the number of shares increased since 2026 has reached [2]. The continuous increase in positions by institutional capital provides solid liquidity support for the stock price.

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Based on the analysis of the latest technical indicators, SMIC (0981.HK) shows the following characteristics[5]:

Technical Indicator	Value	Signal Interpretation
Current Stock Price	HK$79.20	Near Resistance Level
KDJ	K:72.8, D:65.7, J:87.0	Bullish in the Medium Term
RSI (14)	Overbought Zone	Short-term Correction Risk
MACD	No Death Cross	Bullish Trend
Beta	-0.14	Negatively Correlated with the Broader Market
Support Level	HK$72.52	-
Resistance Level	HK$80.64	-

: Currently in a phase, with no clear trend direction. The reference trading range is HK$72.52-HK$80.64[5].

The current valuation of the Hong Kong stock semiconductor sector is in a historically high range:

• SMIC
  : P/E 74.94x (TTM), P/B 0.96x, P/S 4.28x[5]
• Industry Average P/E
  : Approximately 85.3x, significantly higher than the overall level of the Hong Kong stock market
• Price-to-Book Ratio
  : Approximately 4.2x

High valuation reflects the market’s expectation of high growth in the semiconductor industry, but it also means that there may be a greater risk of valuation compression during a correction.

:

• Reason 1: Significant short-term increase, technical indicators show overbought conditions with correction demand
• Reason 2: Valuation is already at a high level, and the expectation gap has narrowed
• Reason 3: Differentiation will occur within the sector, and only enterprises with real performance support can continue to strengthen

:

• The logic of domestic substitution continues to be strengthened, and policy dividends are continuously released
• Demand for AI and smart cars continues to grow, with high order visibility
• Industry integration is accelerating (such as Hua Hong’s acquisition of Huali Microelectronics, AMEC’s mergers and acquisitions, etc.), leading to increased concentration of leading enterprises

:

• Breakthroughs in key technologies such as EUV lithography machines will reshape the global semiconductor landscape
• China’s semiconductor industry is transforming from a “follower” to a player that keeps pace with global leaders
• After valuation digestion, a new allocation window will emerge

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On January 16, the Hong Kong stock market showed a clear differentiated pattern[6]:

Sector	Change	Capital Flow
Semiconductor	Leading Gains	Net Inflow
Automobile	Following Gains	Net Inflow
New Consumer	Leading Declines	Net Outflow
Media	Leading Declines	Net Outflow
Power Equipment	Active	Moderate Inflow

, Hua Hong Semiconductor rose over 7%, SMIC rose over 1%, while [6]. This pattern of “semiconductor sector alone rising, new consumer and media sectors falling together” reflects the current structural preference of market capital.

Indicator	Value	Change
Current Stock Price	HK$178.60	Fell 47.4% from the high of HK$339.80
20-day Moving Average	HK$194.82	Stock price is below the moving average
50-day Moving Average	HK$203.09	Stock price is below the moving average
200-day Moving Average	HK$232.33	Stock price is below the moving average
Daily Volatility	3.69%	High
1-Year Price Change	-	Fell 47.4% from the high

From a technical perspective, Pop Mart’s current stock price is

, showing a typical bearish arrangement pattern, indicating obvious short-term pressure[7].

The structural preference of southbound capital is having a profound impact on the valuation of Hong Kong stock sectors:

: The concentrated allocation of southbound capital to the semiconductor sector has to a certain extent caused capital outflow from the new consumer and media sectors. Taking Pop Mart as an example, although the company’s fundamentals are still solid (third-quarter revenue increased by 245%-250% year-on-year), the market has concerns about the certainty of its 2026 performance growth, leading to phased capital withdrawal[8].

:

Sector	P/E	P/B	Valuation Percentile
Semiconductor	85.3	4.2	Historical High
New Consumer	32.5	5.8	Middle Range
Media	28.4	3.2	Lower-Middle Range
Technology	24.6	3.5	Middle Range
Financials	8.2	0.7	Historical Low

Despite short-term pressure, the valuation recovery logic of the new consumer and media sectors has not been broken:

• Pop Mart’s predicted net profit attributable to parent company for 2025 and 2026 is RMB7.352 billion and RMB10.48 billion respectively, with year-on-year growth rates of 135.24% and 42.53%[9]
• Overseas market expansion has achieved remarkable results, with third-quarter overseas revenue surging 365%-370% year-on-year
• Valuation has fallen from a high level, with a forward P/E of approximately 22x, close to the level of mature IP companies (Disney and Bandai Namco have an average of approximately 25x)[9]

CITIC Securities pointed out that considering the under-allocation of Hong Kong stocks by mainland investors, southbound capital is expected to continue to increase its allocation to Hong Kong stocks, especially the trend of retail capital flowing into Hong Kong stocks through ETF channels is expected to continue[2]. As valuations fall, the attractiveness of the new consumer and media sectors to value-oriented capital will gradually emerge.

Institutions expect the Hong Kong stock market to present a pattern of

. After the semiconductor sector undergoes phased consolidation, capital is expected to spread to the more attractively valued consumer and media sectors, forming a relay upward pattern.

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: The Hong Kong stock market will benefit from the catalysis of domestic “15th Five-Year Plan” proposals and the “fiscal + monetary” dual easing policies of major external economies. With the bottoming out of Hong Kong stocks’ fundamentals coupled with their still significant valuation discount advantage, the Hong Kong stock market will usher in a second round of valuation recovery and further performance recovery in 2026[2].

: In 2026, the inflow structure of southbound capital and foreign capital will tend to be more balanced. The scale of southbound capital inflows may be between HK$75 billion and HK$98 billion. The stabilization of China’s economic fundamentals and the appreciation of the RMB will drive continuous inflows of foreign capital[2].

: As the supply and demand pattern improves, China’s economic cycle is expected to usher in a boom inflection point. After the Federal Reserve’s interest rate cut cycle begins, the “dual easing” of Sino-US policies will resonate, and southbound capital and foreign capital will continue to flow in, driving the medium- to long-term upward trend of Hong Kong stocks and presenting a slow bull trend[8].

Sector	Rating	Logic	Risk Factors
Semiconductor	Hold (Differentiated)	Triple drivers of policy + technology + demand	Valuation correction risk
New Consumer	Accumulate on Dips	Definite performance growth, valuation already digested	Overseas expansion falls short of expectations
Media	Focus	AI empowerment, large valuation recovery space	Slow recovery of the advertising market
Technology	Overweight	Continuous catalysis of AI narrative	Changes in regulatory policies
Financials	Equal Weight	Low valuation, heavy holding by southbound capital	Downward interest rate pressure

:

• Short Term: Avoid blind chasing of high prices, wait for valuation digestion
• Medium Term: Prioritize leading targets with real performance support
• Long Term: Strategically optimistic about the general direction of domestic substitution

:

• Current valuation already has a good margin of safety
• Focus on targets with high performance certainty and abundant cash flow
• Seize the catch-up growth opportunities in sector rotation

:

• Maintain a medium- to long-term optimistic judgment on the Hong Kong stock market
• Grasp the dual main lines of “technological innovation + consumer recovery”
• Pay attention to incremental allocation opportunities brought by continuous inflows of southbound capital

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1. Valuation Correction Risk
   : The semiconductor sector’s valuation is at a historically high level. If market risk appetite declines, it may face valuation compression
2. Performance Verification Risk
   : High growth expectations require continuous performance fulfillment support, and there may be expectation gap adjustments during quarterly reporting periods
3. Macroeconomic Risk
   : External factors such as changes in Sino-US relations and fluctuations in the global semiconductor cycle may affect sector performance
4. Capital Flow Change Risk
   : If the pace of southbound capital inflows slows down, it may affect the overall liquidity of the Hong Kong stock market

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[1] Securities Times - “Southbound Capital Continues to Flow In Since 2026, Institutional Insiders: Hong Kong Stocks Expected to Rise Oscillatingly” (https://www.stcn.com/article/detail/3591092.html)

[2] Sina Finance - “Southbound Capital Continues to Flow In Since 2026, Institutional Insiders: Hong Kong Stocks Expected to Rise Oscillatingly” (https://finance.sina.com.cn/jjxw/2026-01-14/doc-inhhfrsx8458617.shtml)

[3] Caifuhao (Green Fund) - “Long-term Investment Logic of the Semiconductor Sector in 2026” (https://caifuhao.eastmoney.com/news/20260108145752175399480)

[4] Investing.com - “SMIC (0981) Latest Stock Price and Quotes” (https://cn.investing.com/equities/smic)

[5] Jinling AI Technical Analysis Data - SMIC (0981.HK)

[6] CLS - “Hong Kong Stock Midday Review: Hang Seng Index Falls 0.27%, Hang Seng Tech Index Falls 0.22%” (https://www.cls.cn/detail/2259988)

[7] Jinling AI Market Data - Pop Mart (9992.HK) Price Trend

[8] Securities Times - “Just Now! A Big Bull Stock Crashed! What Happened?” (https://www.stcn.com/article/detail/3400005.html)

[9] 36Kr Global - “Labubu’s Viral Popularity, Pop Mart’s Surge in Performance, Why Isn’t the Market Buying It?” (https://letschuhai.com/f4e2d1f1)