Chinese investment into Hong Kong via the Stock Connect programme has surged to record levels this year, injecting about HK$820 billion (US$104 billion) into the city’s equities market and surpassing last year’s previous high of HK$807.9 billion, the Financial Times reports.
This influx of mainland capital has played a pivotal role in reviving Hong Kong’s financial markets following a post-Covid downturn and highlights the growing dependence of the city’s fortunes on Beijing’s policies and Chinese investor appetite.
The Stock Connect scheme, launched in 2014, links mainland Chinese stock exchanges with Hong Kong’s markets, allowing investors with at least Rmb500,000 ($70,000) to trade shares in Hong Kong without breaching China’s capital controls. Cumulative investment through the programme has now reached HK$4.5 trillion, with more than a third of inflows recorded in just the past two years.
Experts cited by the Financial Times say that mainland investors are increasingly looking offshore as bond yields in China fall to historic lows amid economic uncertainty. “From an allocation perspective, it’s a no-brainer to allocate more of your fund into Hong Kong,” Vincent Che, head of equities at China Ping An Insurance Overseas, told the Financial Times.
Southbound trading via Stock Connect now accounts for over half of daily turnover on Hong Kong’s main board, compared to less than 20 percent in 2019. The programme is also a crucial gateway for mainland investors to access tech giants like Alibaba, Baidu, and Tencent, whose shares have surged this year amid AI breakthroughs and signs of regulatory easing.
Hong Kong’s market revival has been bolstered by supportive policy signals from Beijing. In January, People’s Bank of China Governor Pan Gongsheng pledged increased support for Hong Kong listings and bond issuance, alongside boosting foreign exchange reserves allocated to the city. This follows regulatory moves last year to deepen financial links and encourage mainland firms to pursue secondary listings in Hong Kong, which now boasts a record-high pipeline.
“The Hong Kong stock exchange has become the main platform for mainland companies to raise offshore capital,” said David Tsai, partner at Clifford Chance, as reported by the Financial Times.
The renewed investor interest reflects improving sentiment toward Chinese businesses, which had faced government crackdowns and property market challenges in recent years. “The longer-term outlook for Hong Kong has improved,” said James Wang, UBS’s head of China equity strategy.
However, analysts note that Hong Kong’s resurgence is primarily as a hub for Chinese capital rather than a gateway for broader regional or global investment. Drew Thompson, senior fellow at Singapore’s S Rajaratnam School of International Studies, described Hong Kong’s role as “the undisputed clearinghouse for Chinese companies and renminbi settlement,” emphasizing its integration with mainland China’s economy over Asia.
