On April 22, the net Inflow of mainland southbound funds through the Stock Connect into the Hong Kong stock market exceeded 21 billion Hong Kong dollars. The net Buy amount since April has exceeded 180 billion Hong Kong dollars, and the net Buy amount this year has exceeded 620 billion Hong Kong dollars, far exceeding the same period last year.

The Inflow from the south continues to show significant net purchases through the Hong Kong Stock Connect, reflecting the confidence of domestic capital in the future performance of the Hong Kong stock market, and representing significant achievements of the connectivity system.

Net purchases from the south exceeded 21 billion Hong Kong dollars.

During the recent fluctuations in the Hong Kong stock market, the Inflow from the south has once again increased its buying intensity.

On April 22, the net purchases of Hong Kong stocks by Inflow from the south reached 21.36 billion Hong Kong dollars, setting a new historical 12th-high record, demonstrating strong confidence in the Hong Kong stock market.

In fact, since 2025, the scale of Inflow from the south into Hong Kong stocks has continued to expand. As of April 22, Inflow from the south has accumulated a net inflow of 625.822 billion Hong Kong dollars this year. Specifically, the Inflow from the south via the Shanghai-Hong Kong Stock Connect net inflow was 416.752 billion Hong Kong dollars, while through the Shenzhen-Hong Kong Stock Connect the net inflow was 209.07 billion Hong Kong dollars.

From the Historical Data, the preference of Inflow from the south for the Hong Kong stock market has not developed overnight. Since 2021, Inflow from the south has been continuously increasing in Hong Kong stocks, with the total net inflow for the whole year of 2024 exceeding 800 billion Hong Kong dollars, setting a new historical high. Entering 2025, the Inflow speed from the south has further accelerated, with a net purchase of 125.592 billion Hong Kong dollars in January, net purchase of 152.778 billion Hong Kong dollars in February, net purchase of 160.282 billion Hong Kong dollars in March, and again net purchases of 187.169 billion Hong Kong dollars since April.

Regarding the reasons for the increased buying intensity of southbound funds this year, HTSC believes that, on one hand, positive signals are emerging from the economy and real estate data, with several indicators pointing to economic stabilization. The mainland real estate market is also showing signs of recovery, and the risks associated with property companies are being positively addressed. On the other hand, the emergence of DeepSeek changes global expectations for China's AI industry and the global asset allocation logic. Additionally, major AI symbols such as Alibaba being included in Stock Connect drives the allocation of southbound funds towards leading Hong Kong stocks that possess the prosperity and scarcity of the AI industry.

Hong Kong technology stocks are highly favored.

In terms of specific stock purchases by southbound funds, Hong Kong technology stocks are highly favored. According to Wind data, based on the transaction statistics of the top ten most active stocks each day, over the past three months, the net purchase by mainland southbound funds reached. $BABA-W (09988.HK)$ 94.832 billion Hong Kong dollars in net purchases. $TENCENT (00700.HK)$ 19.848 billion yuan in net purchases. $CHINA MOBILE (00941.HK)$ 、 $XIAOMI-W (01810.HK)$ 、 $TRACKER FUND OF HONG KONG (02800.HK)$ The amounts for stocks are also above 10 billion Hong Kong dollars.

According to China Merchants research, from the perspective of segmented industries, the buying behavior of southbound funds shows a "barbell strategy", with net inflow mainly distributed in Technology (Specialty Retail, Software Services, Biotechnology, and Autos) and Dividends (Banks and Other Finance), while relative buying in traditional cyclical sectors like construction, real estate, and energy is relatively low.

Huaxia Fund believes that DeepSeek brings about a valuation reshaping of the domestic AI industry chain, with the Hong Kong Hang Seng TECH Index gathering core domestic AI assets, covering upstream chips, computing power, models, and downstream Software, Hardware manufacturing enterprises, attracting a large inflow of southbound funds since the beginning of the year.

On the other hand, as technology assets exhibit significant volatility, the dividend sector typically includes stable operational enterprises such as banks and public utility state-owned enterprises with solid performance and ample cash flow, featuring stable ROE and dividend ratios, with strong willingness and capacity to return to Shareholders. Their defensive attributes can effectively smooth out fluctuations.

Inflow of capital from the south may continue into the Hong Kong stock market.

The continuous inflow of southbound funds has had a profound impact on the Hong Kong stock market. On one hand, southbound funds have become an important support force for the Hong Kong stock market, offsetting the outflow pressure from foreign capital. Against the backdrop of recent fluctuations and adjustments in the Hong Kong stock market, the counter-cyclical inflow of southbound capital effectively buffered the market's downward pressure. On the other hand, the inflow of southbound funds has also driven a valuation recovery in the Hong Kong stock market. As southbound funds concentrate on technology stocks and high-dividend stocks, the valuation levels of related sectors have seen significant improvement.

Looking ahead, several institutions expect that the continued inflow of southbound funds is likely to support the recovery of valuations in the Hong Kong stock market. HTSC stated that multiple factors may continue to drive southbound funds into the Hong Kong stock market:

First, the development of the Chinese AI industry led by DeepSeek may continue to drive a reevaluation of the value of Chinese technology stocks, with the main symbols mostly listed in Hong Kong.

Second, the full expansion of domestic demand focusing on boosting consumption is a key policy this year. The Hong Kong stock market hosts many "scarce" new consumption symbols, including domestic beauty products, leisure goods (such as blind boxes), and numerous leading new consumer stocks that are listed in Hong Kong, which may attract southbound funds to continue allocating to new consumption symbols.

In addition, from the perspective of capital market policy, both regions will jointly promote the construction of Hong Kong as an international financial center, including encouraging more quality enterprises from the mainland and internationally to list in Hong Kong, promoting the release of the "Hong Kong Capital Markets White Paper" to elevate capital market levels, creating a global industry cooperation hub in Hong Kong, and strengthening capital market regulation to prevent financial risks.

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Editor/rice