Hong Kong stocks are undergoing a painful "blood transfusion"

Ask AI · What kind of structural shift does southbound capital inflows against the trend hint at?

On March 26, Hong Kong stocks staged an extremely high-conflict “plunge.” On one side were the cheers from the companies’ earnings season, but on the other side the index kept falling straight down. By the close, the Hang Seng Index fell 1.89%, and the Hang Seng Tech Index plunged 3.28%.

The three companies—China Life, Pop Mart, and Kuaishou—that delivered what looked like “impressive” results were all, without exception, subjected to a “violent crackdown” by the capital markets.

Kuaishou’s 2025 revenue grew year over year by 12.5% to RMB 142.78 billion, and its profit performance also beat expectations. However, on March 26, the stock price fell by more than 14%.

Pop Mart’s 2025 revenue surged 184.7%, net profit more than tripled, and LABUBU IP revenue exceeded 10 billion. This track record is enough to outshine the entire consumer segment, yet the stock price retreated more than 30% within the past two days.

As the “stabilizer” of the insurance industry, China Life’s 2025 attributable net profit reached RMB 154.078 billion, up 44.1% year over year, and total premiums first surpassed RMB 700 billion. But on March 26, the stock price dropped 8.48%.

The direct causes of the declines for these three companies were different. The market worried that Kuaishou’s “heavy spending on AI” would create cost burdens. Pop Mart stumbled on overly conservative expectations for growth pace. For China Life, the pain point was that in the fourth quarter of 2025, it recorded a net profit loss of RMB 13.726 billion.

The market amplified the shortcomings of these high-quality companies, turning the annual report “good news” into “bad news.” One important reason is that Hong Kong stocks are currently in a liquidity up-and-down shock in an offshore market.

Recently, due to the continuous escalation of the situation in the Middle East, international oil prices have been trading at high levels around $100. This has directly triggered global anxiety about inflation.

That anxiety in Hong Kong stocks has transmitted into a cold logic chain: geopolitical conflict (Middle East) — oil supply-demand imbalance — global inflation expectations rising — rate-cut expectations collapsing — the dollar strengthening — Hong Kong stock valuations and liquidity getting hit twice.

Middle East capital and global safe-haven capital are currently in “fortress mode,” adopting an all-defense, low-turnover, extremely conservative survival strategy. Funds will flow into U.S. dollar cash, U.S. Treasuries, or overnight reverse repo markets. For some investors, cash is the rations and ammunition in the trenches—only by holding cash can they be ready to “open fire” at any time when historic opportunities arise.

Against the backdrop of blood loss in the broader market, fundamentals that are steady and liquidity that is strong often become the “cash-dispensing machine” for institutions to liquidate positions to put out the fire (adding margin to support other sectors).

As an offshore market that is extremely sensitive to external conditions, Hong Kong tech stocks are hit first. The most intuitive sign of weakening liquidity is not that no one is selling, but that no one is stepping in to buy. Therefore, the correction in Hong Kong stocks is not the fault of the companies, but a shadow cast by the global macro environment.

It is worth noting that southbound capital today net bought more than HKD 3.3 billion against the trend. The most worth watching signal occurred on March 9 this year, when southbound capital’s net inflow in a single day unexpectedly reached HKD 37.2 billion. A flow of capital on that scale is very rare in Hong Kong stock history.

Southbound capital becoming “more” is not a short-term behavior, but a long-cycle trend that has been ongoing for two years.

▲ Growth in southbound capital’s net buy amount over the past 5 years

It can be said that amid the pain of adjustment cycles, the Hong Kong stock market is undergoing a fundamental shift—from a “global capital transit hub” to a “China asset offshore pricing center.” This is a historical structural mismatch and reshaping.

Hong Kong stocks’ volatility may still be fierce in the short term, but its resilience will no longer depend on the mood of the Federal Reserve; it will instead depend on the quality of China’s economy and domestic investors’ confidence in allocation.