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Hong Kong’s stock exchange has reported its highest quarterly profit in almost four years, driven by increased trading activity and listing volumes due to stimulus measures in China.
According to data from Wind Information, mainland Chinese investors are significantly increasing their presence in the Hong Kong stock market, with the tech-focused Hang Seng Index reaching approximately three-year highs.
On Monday, net purchases of Hong Kong stocks by mainland Chinese investors soared to a record 29.62 billion Hong Kong dollars (about $3.81 billion). This figure represents the highest level of mainland investment since the introduction of the “connect” programs, which facilitate easier access for local investors to certain offshore stocks. The Shanghai Connect was initiated in November 2014, while the Shenzhen Connect followed in December 2016.
Despite this positive trend, the Hang Seng Index saw a slight decline of around 0.7% on Tuesday morning, reflecting a sell-off in U.S. markets due to concerns over potential tariffs affecting global economic growth.
The latest figures indicate that nearly 18 billion HKD came from net buys via the Shanghai Connect on Monday, with purchases via the Shenzhen Connect adding another 11.63 billion HKD.
Notably, stocks of companies like Alibaba and Tencent, which are not available for trading in mainland China, attracted the most significant net purchases, according to Wind data.
In a recent affirmation of its pro-growth policies, China highlighted plans to bolster private sector technological innovation and increase the fiscal deficit to a notable 4% of GDP, including an expanded consumer subsidy initiative.
Citi’s global macro strategy team upgraded its stance on Chinese equities, particularly the Hang Seng China Enterprises Index, to overweight, while positioning the U.S. as neutral. Analysts cited tariff risks as a significant factor that previously deterred investment in Chinese stocks but noted a clearer opportunity in the Chinese tech sector.
The analysts remarked, “Ignoring tariff issues, the case for Chinese technology is compelling. DeepSeek’s advancements illustrate that Chinese tech is operating at the forefront of technological innovation, even amidst export restrictions. This was underscored by recent releases from Tencent and Alibaba,” they stated.
Investing in “Cheap and Under-owned” Stocks
Since late September, the influx of both domestic and foreign institutional investors into Chinese stocks has surged following the announcement of more vigorous stimulus measures by Beijing. Additionally, the release of DeepSeek’s latest model in late January contributed to a market reaction that favored major tech firms, many of which are listed in Hong Kong rather than mainland exchanges.
Manishi Raychaudhuri, CEO of Emmer Capital Partners, suggested that there is considerable potential for investment in emerging markets, particularly within Asia, as global equities begin to recover from current challenges. He noted, “Greater China, which includes Hong Kong and mainland China, offers stocks that are relatively cheap and currently under-owned.”
His observations included a modest uptick in consumer spending driven by recent policy actions, suggesting a potential shift in market dynamics. “While it’s not yet at the level desired by investors, it marks a departure from long-standing trends,” he explained.
Raychaudhuri highlighted specific sectors within the Hong Kong market that he believes will perform well, including internet companies, major tech platforms, and consumption-related businesses such as athleisure, restaurants, and the travel and tourism industries.
— CNBC’s Sam Meredith and Anniek Bao contributed to this report.
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