Preface

In a significant market trend, Mainland Chinese investors are actively investing in Hong Kong stocks as the tech-centric Hang Seng Index reaches its highest levels in three years. This article delves into the dynamics behind this surge and its broader economic implications.

Lazy bag

Mainland Chinese investors are increasingly drawn to Hong Kong's tech-heavy stocks. Monday marked a record purchase, reflecting confidence and strategic market moves.

Main Body

On an exceptional trading day, mainland Chinese investors marked a record in acquiring Hong Kong stocks, facilitated by the Hong Kong market's unique "connect" program with mainland China. This program, which allows easier access for local investors to Hong Kong-listed stocks, saw a substantial net influx of 29.62 billion Hong Kong dollars. The Connect programs, starting with Shanghai in November 2014 and followed by Shenzhen in December 2016, are pivotal in this cross-boundary investment surge.

Despite the Hang Seng Index experiencing a slight dip of 0.7% on Tuesday morning due to a sell-off in U.S. stocks over tariff concerns, the appetite for Hong Kong stocks remained unabated. The Shanghai Connect reported nearly 18 billion HKD in net purchases, with Shenzhen Connect contributing another 11.63 billion HKD.

Particularly noteworthy were significant investments in major tech stocks such as Alibaba and Tencent, which are not available on mainland exchanges. These stocks were among the most substantial net purchases, underscoring investors' confidence in technology's growth potential.

In recent news, China's commitment to fostering economic growth through tech innovation has been underscored by fiscal measures such as increasing consumer subsidies and setting a rare fiscal deficit target of 4% of GDP. This has further bolstered confidence in Chinese tech, as highlighted by Citi's upgrade of the Hang Seng China Enterprises Index to 'overweight.' The analysts emphasized that despite tariff risks, Chinese tech remains competitive at the global frontier.

The recent unveiling of DeepSeek's new technological advances, coupled with Tencent and Alibaba's innovations, has sparked renewed interest in Chinese stocks among both Chinese and international investors. Late September's announcement of robust stimulus plans by Beijing marked the beginning of this rejuvenated interest.

Manishi Raychaudhuri from Emmer Capital Partners suggested that the appeal of emerging Asian markets, particularly Greater China, remains strong due to undervalued stocks. This trend is partly driven by the consumption boost policies and is expected to continue, especially for internet and consumer-related sectors, including athleisure, restaurant, and tourism stocks.

Key Insights Table