Report Body

• Since mid-January this year, Hong Kong stocks have led the global stock market.

Since mid-January, the Hong Kong stock market has significantly increased, with the main indices leading the annual growth in the major markets we have statistically analyzed. As of March 7, the Hang Seng TECH Index has accumulated a growth of 41.7%, while the Hang Seng China Enterprises Index and the Hang Seng Index have also achieved impressive growth rates of 29.2% and 27.1% respectively, ranking prominently among the major markets we track. The A-shares market, represented by Wind All A, has also performed well, with a cumulative growth of 11.1%. In contrast, the S&P 500 Index and the Nasdaq have decreased by 1.0% and 5.0% respectively during the same period.

Therefore, in comparison, we believe there are two very obvious characteristics worth noting about the recent strength of Hong Kong stocks:

First, the strength of A-shares and Hong Kong stocks is occurring against the backdrop of continuous adjustments in overseas developed markets represented by US stocks, demonstrating a distinct independent market trend, reflecting a recent reassessment by domestic and foreign investors of China Assets, with a growing confidence in going long on Chinese assets.

Second, the Technology Sector represented by the Hang Seng TECH Index has shown significant dominance in this market trend, with new economies such as deep learning, Siasun Robot&Automation, and AI becoming important carriers of this market movement, indicating that China’s technological strength is constantly rising, driving a new wave of global technological revolution.

• Foreign capital has seen a phased return after the Chinese New Year, and the overall outflow has slowed down.

After the Spring Festival, foreign capital briefly returned to the Hong Kong stock market, but as the market turned volatile, there was renewed outflow; however, the overall outflow has slowed. The year 2020 marked a turning point for foreign capital flow in the Hong Kong stock market. Prior to that, foreign capital flow in the market generally exhibited volatility and did not form a unidirectional trend. However, in 2020, with the outbreak of the pandemic, the Hong Kong stock market saw sustained net outflows of foreign capital. Starting in the second half of last year, signs of marginal improvement in foreign capital flow were observed in the Hong Kong stock market. In the two waves of rising markets last year, in the second half of the year and around spring, foreign capital showed a phased return.

• Southbound funds are an important incremental source of capital in this round of market activity.

This year, the inflow of southbound funds into the Hong Kong stock market has significantly accelerated, making them an important incremental capital source for the current Hong Kong market rally. Many investors distinctly remember that in early 2021, the inflow of southbound funds exceeded 300 billion Hong Kong dollars in January alone, marking the highest moment on record. However, in the latter half of 2021, as well as in 2022 and 2023, the inflow speed of southbound funds continued to slow, and the Hong Kong stock market began to correct continuously from early 2021. But this year, the net inflow of southbound funds into the Hong Kong stock market has noticeably accelerated. As of March 7, the cumulative inflow has reached 294.8 billion Hong Kong dollars, significantly higher than the same period data in 2022, 2023, and 2024, contributing to the recent strength in the Hong Kong stock market. As of March 7 this year, the market value held via the Hong Kong Stock Connect has risen to 4.5 trillion yuan, increasing its share of the total market capitalization of Hong Kong stocks to 12.7%.

Looking ahead, it is believed that with the Chinese economy recovering and positive macro policies continuing to take effect, alongside the comprehensive reforms for high-quality development in the Capital Markets and the current low interest rates, the profitability of listed companies rebounding from the bottom, China's asset attractiveness is expected to continue improving, thereby driving the Hong Kong stock market to progress positively.

Editor/Somer