Bank of China International published a strategy report on Hong Kong stocks, stating that liquidity in the Hong Kong financial market remains ample, and trading volume has increased this year. As of June 18, 2023, the average daily trading volume reached 240.1 billion HKD, significantly higher than 110.8 billion HKD in the same period last year and the full-year forecast of 131.8 billion HKD for 2024. The Hang Seng TECH Index has cumulatively risen by 16.7% since 2025.
The report indicates that liquidity in the Hong Kong financial market is abundant, with the overnight interbank lending rate (HIBOR) close to zero. Despite rising geopolitical risks in recent months, the ample liquidity in the Hong Kong financial market helps stabilize the stock market and improve market sentiment. Since early May this year, the Hong Kong Monetary Authority has injected approximately 128.9 billion HKD into the banking system through Forex market operations, with the total bank reserves increasing significantly from 44.6 billion HKD on May 2, 2025, to 173.5 billion HKD on June 18. Meanwhile, the overnight lending rate plummeted from 4.22% on May 2 to 0.01% on June 18, demonstrating extremely sufficient liquidity in the Hong Kong financial market.
Moreover, the IPO market in Hong Kong has thrived against the backdrop of rising market liquidity. According to WIND data, the total fundraising amount from Hong Kong stock market IPOs has reached 77.99 billion HKD in 2025 to date, marking a year-on-year growth of 559.8%. Southbound trading has recorded a net inflow of 650.7 billion RMB since 2025, representing a year-on-year increase of 104%.
The report suggests that the net inflow from southbound trading has performed steadily in recent years, playing an important role in stabilizing the Hong Kong stock market amid heightened geopolitical risks. As of June 18, 2025, southbound trading recorded a net inflow of 650.7 billion RMB against the backdrop of anticipated economic recovery and rising geopolitical risks, significantly higher than the 318.2 billion RMB recorded in the same period last year. Southbound trading has played a key role in improving investment sentiment and identifying investment opportunities in the Hong Kong stock market. Over the past decade, related companies from the mainland have gradually obtained a dominant position in the Hong Kong stock market. According to data from HKEX, as of the end of May 2025, stocks of relevant mainland companies accounted for 81.01% of the total market cap and 91.04% of the total trading volume. Since 2025, southbound trading has accounted for 21.8% of the average daily trading volume in Hong Kong, surpassing 17.3% in 2024, 14.1% in 2023, and 11.8% in 2022.
The report advises investors to closely watch some active stocks in southbound trading. Looking ahead, Bank of China International anticipates that demand from mainland investors for Hong Kong-listed stocks through southbound trading will remain strong in 2025, due to the increased availability of high-quality Technology/high-end manufacturing stocks, attractive valuations in the Hong Kong stock market, and high dividend yields. The report forecasts that the net inflow from mainland to Hong Kong southbound trading will reach 1.2 trillion RMB this year, exceeding 744 billion RMB in 2024 and 289.4 billion RMB in 2023. The report considers that the mainland-Hong Kong Stock Connect mechanism will be a key driver for the long-term potential re-rating of the Hong Kong market.
Data on investment behavior in 2025 to date shows that southbound investors are focusing on the Internet, telecommunications, semiconductor, and automobile manufacturing industries. The report recommends that investors keep an eye on some active stocks in southbound trading, including: Alibaba-W (09988.HK), MEITUAN-W (03690.HK), China Mobile (00941.HK), Tencent (00700.HK), Semiconductor Manufacturing International Corporation (00981.HK), and Ideal Cars (02015.HK).
