Southbound net buying via Stock Connect reached HKD50 billion

Southbound net buying via Stock Connect reached HKD50 billion

Southbound net buying via Stock Connect has reached HKD50 billion, marking a significant milestone in the flow of mainland Chinese capital into Hong Kong's stock market. This surge in investment highlights the growing influence of Beijing's policies on Hong Kong's financial landscape.

The Stock Connect program, launched in 2014, has become the primary gateway for Chinese investors to access assets not available on the mainland. This year, investments through the Stock Connect scheme have reached HK$820 billion ($104 billion), surpassing last year's record of HK$807.9 billion [1].

The increasing trend in mainland investments is evident in the daily trading dynamics of Hong Kong's stock exchange. Southbound activity, which refers to money flowing from mainland China into Hong Kong, now accounts for more than half of all trades on the main board of Hong Kong's stock exchange. This is a substantial increase from 2019, when such trades made up less than 20% of daily turnover [1].

The appeal of Stock Connect lies in its ability to open doors to tech firms like Tencent, Alibaba, and Baidu, which are based in China but listed in Hong Kong. These companies have seen their shares rebound sharply this year, partly due to the release of a new large language model by DeepSeek, a Chinese AI startup, and the easing of tensions between tech firms and China's regulators [1].

The current wave of capital is being pushed by policymakers. Central Bank Governor Pan Gongsheng stated at a Hong Kong conference in January that China would back "more high-quality enterprises to list and issue bonds" in Hong Kong and would also "increase the proportion of national foreign exchange reserves allocated in Hong Kong" [1].

This policy push has led to a record high in Hong Kong's IPO pipeline, with a rush of mainland firms lining up for secondary listings in the city. While global capital flows have been sluggish, mainland reallocation within itself has been a significant driver of Hong Kong's stock market recovery.

References:
[1] https://www.cryptopolitan.com/china-investment-in-hong-kong-all-time-high/