Hong Kong Stocks

Mainland Chinese investors purchased HK$62.9 billion worth of Hong Kong stocks in July through the cross-border Stock Connect programme, extending their buying trend from June as they shifted into undervalued markets amid volatility in AI-linked shares.

Mainland Chinese investors purchased HK$62.9 billion in Hong Kong stocks through the cross-border Stock Connect programme in July, extending their buying from June, as they shifted into the undervalued Hang Seng Index to avoid volatility in AI-linked shares.

Chinese mutual funds reduced their Hong Kong stock holdings via the southbound Stock Connect to a two-year low in the second quarter of 2024, with the share of Hong Kong stocks in their portfolios falling to 23.3%, according to a report by China International Capital Corporation. Despite a significant southbound capital flow during the same period, the holdings declined compared to the 23.9% recorded two years earlier.

Hong Kong stocks are trading at a widening valuation discount to their mainland China counterparts due to liquidity strains and Beijing’s measures to restrict capital outflows.

Hong Kong stocks have underperformed other global markets in the first half of the year, with analysts attributing this to sluggish consumer spending impacting Chinese internet platforms and an AI trade widening performance gaps. A surge in tradable shares from expired IPO lock-up periods could further strain the market, prompting the Hong Kong exchange to implement measures like lowering trading barriers for individual investors.

Hong Kong stocks face a liquidity test amid market enthusiasm driven by SpaceX's historic IPO, which is expected to set a new fundraising record. The listing could also elevate Elon Musk to the first-ever trillionaire, reshaping capital flows and investor strategies.

Mainland Chinese investors are shifting funds from Hong Kong stocks to onshore markets driven by enthusiasm for artificial intelligence. Hong Kong stocks saw HK$3.6 billion in outflows through the cross-border exchange link programme in May, the first monthly outflow in three years.

Chinese investors are exiting Hong Kong stocks as artificial intelligence (AI) attracts capital onshore. The shift reflects a reallocation of investment toward AI-driven opportunities within mainland China.