The benchmark index has reached its highest level since 2022 as a result of an exceptional rebound in Hong Kong’s share market led by mainland Chinese investors.
Mainland investors usually use the Stock Connect scheme’s southerly link to purchase or sell shares listed in Hong Kong.
This year, Hong Kong’s stock market has increased by around 15%, hitting its highest level since February 2022. Optimism over China’s IT industry, especially the growth of domestic AI startup DeepSeek, is driving the rally.
In prior rallies, mainland investors have played a significant role this year, demonstrating their increasing market power. The premium that onshore A-shares command over offshore H-shares has also decreased due to the change. This week, mainland investors purchased HK$75 billion ($9.6 billion) worth of Hong Kong shares, the most since January 2021.
According to UBS data, southbound activity makes up 25% of Hong Kong’s total market turnover, up 9% from September 2024 lows. The majority of this activity comes from mainland retail and private fund managers.
An analyst at Guotai Junan Securities named Ximiao Chen told a conference on Wednesday that the Hong Kong rally was the first of its kind since mainland investors were driving the surge and global investors were following suit. While mainland investors were quite negative about the market, Chen added that the initial involvement of overseas investors was the main driver of the Hong Kong market in 2024.
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