Group 1 - The Hang Seng Technology Index experienced a decline, with the Hang Seng Technology ETF Tianhong (520920) dropping by 1.67% and a trading volume exceeding 540 million yuan [1] - The Hang Seng Technology ETF Tianhong has seen a net inflow of over 1.9 billion yuan on October 21, marking ten consecutive trading days of net inflows, totaling 19.38 billion yuan [1] - The Hang Seng Technology Index consists of the top 30 Hong Kong stocks related to technology themes, covering sectors such as information technology, consumer discretionary, and communication services [1] Group 2 - Tianhong Fund indicated that after two rounds of optimization by 2025, the core asset quality of the Hang Seng Technology Index will significantly improve, with BYD increasing its global market share in the electric vehicle sector by 2 percentage points in Q3 [2] - The overall net profit growth rate of the index constituents reached 16.5% in Q3 2025, with a median ROE exceeding 14%, and notable growth in advertising revenue for Tencent Video and Alibaba's overseas business [2] - Financial support for the sector is strong, with net purchases of index constituents exceeding 1 trillion Hong Kong dollars in the first three quarters, contributing to the recovery of the sector [2]

Investment Rating - The report assigns an "Overweight" (OW) rating to Tencent, Alibaba, and Meituan, while maintaining an "Equal Weight" (EW) rating for Kuaishou, Bilibili, JD, Mango Excellent Media, Focus Media, iQIYI, and Baidu, and a "Underweight" (UW) rating for Weibo [4]. Core Insights - The Chinese advertising industry is projected to grow by 11.6% year-on-year in 2025, reaching RMB 1.8 trillion, an increase from the previous forecast of 7% [2][28]. - Online advertising growth is expected to rise from 8% to 12%, while offline advertising growth is revised down from 2% to 1% [2][28]. - Key growth areas in online advertising include short video ads (upgraded growth rate from 13% to 21%), social ads (from 8% to 12%), and e-commerce ads (from 8.3% to 10.8%), while search ads are expected to decline from a growth of 1% to a decrease of 7% [2][28]. Demand-Side Long-Term Trends - Advertisers are concentrating their budgets on fewer platforms, with the average number of platforms used decreasing from 10.1 in 2022 to 8.1 in 2025 [33]. - There is a growing preference for online advertising, with performance advertising expected to increase from 63% to 66% of total budgets by 2025 [36]. - Advertisers are shifting focus from brand awareness to customer purchases, indicating a change in marketing priorities [40]. Competitive Landscape - Short video and social ads continue to lead in popularity, with Douyin, WeChat, and Tencent Video Accounts expected to outperform Kuaishou [3][50]. - Major share gainers include Douyin, Tencent (WeChat, Tencent Video Accounts), and Meituan, while share losers are Weibo, Baidu, and iQIYI [3][50]. AI Integration - AI-enabled advertising tools are enhancing efficiency, reach, and effectiveness for leading internet advertising companies, allowing them to capture more market share [3][50]. - The report suggests that companies with limited improvements in advertising efficiency may see a decline in market share [3]. Stock Selection Strategy - The report recommends an overweight position in Tencent, Alibaba, and Meituan, with an equal weight on Kuaishou, Bilibili, JD, Mango Excellent Media, Focus Media, iQIYI, and Baidu, and an underweight position in Weibo [4].