Funds continue to flow in, with multiple Hong Kong stock ETFs increasing in size against the trend

Affected by Middle East geopolitical conflicts, since March, global stock markets have experienced significant volatility, with the Hang Seng Index performing relatively behind. During this period, multiple Hong Kong stock-related ETFs have continued to see net capital inflows, with their sizes growing against the trend. Several fund managers believe that current Hong Kong stock valuations are at low levels, especially in the technology sector where valuation is particularly attractive. If overseas funds flow back in the future, Hong Kong stocks are expected to see a valuation recovery rally.

Choice data shows: As of May 6, since March, the China Hong Kong Stock Connect innovative drug ETF of Harvest Fund increased by 3.89B shares, with an average transaction price of 1.58 yuan, resulting in a total net capital inflow of 6.13B yuan; the Huaxia Hang Seng ETF increased by 1.33 billion shares, with an average transaction price of 2.65 yuan, totaling a net capital inflow of 3.53B yuan. Additionally, the Huaxia Hang Seng Technology ETF and E Fund Hang Seng Technology ETF both received over 3 billion yuan in net capital inflows, while the China Concept Internet ETF E Fund, Hang Seng Technology ETF Tianhong, and Hang Seng Technology ETF Huatai-Pinebridge each exceeded 1 billion yuan.

Looking at a longer timeline: As of May 6, year-to-date, the Huatai-Pinebridge Hang Seng Technology ETF and Huaxia Hang Seng Technology ETF received net capital inflows of 12.15B yuan and 11.26B yuan, respectively; the China Concept Internet ETF E Fund, the Hong Kong Stock Connect innovative drug ETF of Harvest Fund, and the E Fund Hang Seng Technology ETF each exceeded 8 billion yuan.

Meanwhile, public funds are actively deploying Hong Kong stock products. Choice data shows that as of May 7, 55 new Hong Kong-themed funds have been launched this year, with a total issuance scale of 24.45 billion yuan, far exceeding the levels of the same period last year.

At this moment, institutions believe that Hong Kong stocks are presenting a rare good opportunity for a left-side allocation. A fund manager specializing in tech stocks in Shanghai stated that Hong Kong stocks may soon experience an independent rally. After recent adjustments, Hong Kong stock prices are now sufficiently cheap, and the market may have priced in excessive pessimism. Therefore, once overseas funds flow back in the future, Hong Kong stocks will have a significant valuation recovery opportunity. “Currently, some internet stocks in Hong Kong are valued at historically low levels. In fact, with strong ecological barriers and late-mover advantages, these companies have the opportunity to re-emerge on a growth trajectory through continuous ecological optimization,” said the fund manager.

“Although Hong Kong stocks have experienced a phased adjustment since last year, we remain optimistic about participating in this round of Hong Kong stock dips through a growth-oriented, dividend-yielding approach. As the Middle East geopolitical tensions gradually ease, the previously formed rate hike expectations driven by pessimism may also change. History shows that when Chinese corporate profits enter an upward cycle and overseas interest rate environments remain accommodative, the Hong Kong market is likely to see dual improvements in valuation and earnings,” said Xu Tingquan, Deputy Director of the Overseas Equity Investment Department at HSBC Jintrust.