Chinese Investors Boost Hong Kong Shares

By Samuel Shen and Summer Zhen
SHANGHAI/HONG KONG (Reuters) – Chinese investors are piling into Hong Kong shares drawn by lower valuations amid escalating U.S.-China rivalry.

A record $90 billion from the mainland has fueled a 21% rally in Hong Kong stocks in the first half of 2025, reshaping a market previously avoided by foreign investors.

“The Hong Kong stock market is being repriced by mainland money,” said Chen Dong, fund manager at Hangzhou Ultraviolet Private Fund. He described the influx as a “gold rush” from various directions.

In contrast, China’s benchmark CSI 300 index has seen only minimal movement. Domestic investors, frustrated with low returns and a sluggish economy, are transferring funds from onshore A-shares to Hong Kong equities, which trade at a discount.

Hong Kong’s H-share market benefits from robust funds via the Stock Connect scheme, a series of initial public offerings (IPOs), and international investors diversifying amidst a weakening U.S. dollar.

For 40-year-old investor Zhu Haifeng, Hong Kong shares make up 80% of his portfolio, attracted by lower prices on dual-listed companies such as Tsingtao Brewery and Guangzhou Baiyunshan Pharmaceutical.

Mainland investors now account for 50% of Hong Kong’s daily stock turnover, up from about 30% at the start of 2024, as per Societe Generale estimates.

Institutional investments are also surging, narrowing gaps in prices for dual-listed stocks, despite capital controls creating some variations.

Analysts predict that Hong Kong’s bull market will persist, bolstered by U.S. rate cuts and optimism regarding China’s technological advancements. High-dividend bank shares attract yield-focused investors as long-term treasury yields approach record lows.

The dividend yield of an index tracking Hong Kong-listed Chinese companies is 3.7%, outpacing the 2.9% yield for the CSI 300.

Hong Kong is seen as a proxy for “national champions,” emphasizing the tech-heavy listings in contrast to the macro-sensitive sectors of A-shares.

Goldman Sachs recently named ten “prominent” Chinese companies, largely absent from mainland listings, recommending them as buys, including Tencent, Alibaba, and Xiaomi.

Chinese retail investor Guo Changzhen, who began investing in Hong Kong’s high-dividend shares late last year, cited low yields on bonds and deposits as reasons for his switch.

Wang Yi, CSOP Asset Management’s CIO, is bullish on Hong Kong stocks and reports increased global investment interest.