What changes have occurred in the current capital structure amid the fluctuations in the Hong Kong stock market?

How Will Capital Rebalancing Shape the Outlook for the Hang Seng Tech Index?

Recently, the Hong Kong stock market has shown a volatile pattern under multiple influencing factors. On one hand, geopolitical risks have increased temporarily, leading to fluctuations in global risk appetite; on the other hand, there are still divergences within the market regarding the profit realization rhythm in the tech sector. Against this backdrop, the fluctuating trend of the Hang Seng Tech Index has raised questions among many investors about the capital flow:

Is capital withdrawing? Or is something new happening?

1. Domestic Capital Return Forming Stable Support

First, looking at southbound capital, its participation in the Hong Kong stock market has clearly rebounded recently. As of March 23, the transaction proportion of southbound capital has returned to over 30%, rising back to a mid-level range. This change itself indicates that the activity and influence of mainland capital in the Hong Kong stock market are on the rise.

Chart: The transaction proportion of southbound capital in the Hong Kong stock market has rebounded since March, returning to the 30% mid-level

Data Source: Wind; as of 2026/3/23

But the more critical question is not just “Is there capital?” but “Where is the capital flowing?” Structurally, southbound capital is still primarily concentrated in the information technology sector, indicating that the growth theme has not switched. In the environment of market volatility, capital has not shifted to defense but continues to be allocated toward technology.

Chart: Structurally, southbound capital primarily flows into the information technology sector

Data Source: Wind; as of 2026/3/23

Meanwhile, the allocation behavior of institutional capital also provides further verification. Recent data shows that the weighting of mainland capital in the Hang Seng Tech Index has increased by approximately 12% compared to the previous period, significantly higher than that of the Hang Seng Index and sectors like dividends and consumption; the Hong Kong Stock Connect funds also maintain stable increases. This means that amid market fluctuations, domestic capital is continuously concentrating on the tech sector. From “catching the decline,” it has gradually shifted to “choosing directions,” with the Hang Seng Tech Index being one of the most important carriers in this process.

2. Disparities in Foreign Capital, Short-Term Disturbances More than Trend Changes

In contrast to domestic capital, foreign capital has shown more pronounced structural differentiation.

Overall, the changes in foreign capital allocation to Hong Kong stocks under EPFR are not significant, but when split, active and passive funds have exhibited divergent trends. In the past two weeks, against the backdrop of escalating Middle Eastern tensions, overseas active funds have shifted from continuous inflows to net outflows, with European and American funds becoming the main sources of outflow. This behavior aligns with historical experiences, where, during periods of rising geopolitical risks, active funds often prioritize reducing risk exposure.

However, passive funds continue to flow in, providing some hedging for the overall capital situation. This also implies that the current changes in foreign capital reflect more of a phase adjustment under risk appetite disturbances, rather than a systematic withdrawal from Chinese assets.

Chart: Currently, overseas active funds have turned to outflows, while passive funds maintain inflows

Data Source: EPFR, as of March 18, 2026, Unit: Million USD

Moreover, if we broaden our perspective, another clue emerges.

Since the fourth quarter of 2025, the Japanese and Korean markets have been continuously strengthening, leading to increased global capital allocation to Asia and emerging markets. EPFR data shows that the inflow scale of global and emerging market funds has significantly rebounded since the beginning of the year. During this process, Hong Kong stocks, as an important part of emerging markets, have also simultaneously received capital inflows. The inflow during this phase largely comes from the “spillover effect” of global allocation.

Chart: Overseas active foreign capital continues to increase allocation to global emerging markets

Data Source: EPFR, as of March 18, 2026

Entering 2026, this structure has begun to show marginal changes. Funds have gradually shifted from “only allocating to Asia” to “starting to reassess China.” Looking at ETFs listed abroad that invest in Chinese assets, the capital flow has shifted from continuous outflows to phase-based inflows, with allocation direction more concentrated on discretionary consumption and other sectors that have repair elasticity.

3. The Hang Seng Tech in Capital Rebalancing

Putting together the above capital clues provides a more complete market picture:

The current Hong Kong stock market is not in an environment of continuous capital outflows but is undergoing a typical rebalancing process. On one hand, domestic capital is continuously returning and concentrating on the tech sector, forming a more apparent bottom support; on the other hand, while foreign capital has shown fluctuations under short-term risk disturbances, it has not departed overall, and marginal signs of stabilization and inflow have appeared.

In this structure, the position of the Hang Seng Tech Index has also become clearer.

From below, the continuous allocation of southbound capital and institutional funds provides strong capital support;

From above, once external uncertainties ease, the currently observing or phase-based withdrawing foreign capital has room for reflow, and the tech sector is often a priority allocation direction for such funds.

In a phase where uncertainty has not fully dissipated, the market may still fluctuate, but the direction of capital is quietly changing.

E Fund Hang Seng Tech ETF (513010, connected fund: Class A 013308 / Class C 013309) serves as a direct benchmarking index allocation tool, offering advantages in liquidity, fee rates, and transparency.