Analyzing the Driving Forces Behind Hong Kong Stock Market Trends – What’s Next?

In global markets, Hong Kong stocks have emerged as a preferred destination for capital. This year, the Hong Kong market has remained highly active, with the Hang Seng Index (HSI) hitting a high of 25,735.89 points in July—its highest level since 2022.

The market’s vibrancy is evident in both primary and secondary markets. On the primary side, the IPO market continues to thrive, with major A-share companies listing in Hong Kong, increased refinancing activity, and a noticeable uptick in subscription trading. In the secondary market, trading volumes have surged, with southbound inflows exceeding HK$820 billion year-to-date, surpassing last year’s total.

Who’s Driving the Market?
Clearly, fundamentals alone cannot explain the current rally. Liquidity is a key factor. A July report from CICC highlighted that both macro and micro liquidity conditions are accommodative, shaping the market’s trajectory. Additionally, sector-specific trends have outpaced the broader index, with crowded trades and concentrated bets in hot sectors.

The Role of Liquidity
While fundamentals provide support, ample capital and robust liquidity are fueling the market’s momentum.

The rally has persisted recently. As of July 28, the HSI closed up 0.68% at 25,562.13 points, after briefly touching 25,735.89 on July 24—a 2022 peak.

Zooming out, since hitting a low of 16,964.28 points on September 11, 2024, the HSI has trended upward, peaking in October 2024 and March 2025 before consolidating. Over 214 trading days (September 11, 2024, to July 28, 2025), the index rallied 48.32%.

Behind this activity, liquidity stems from macro and micro sources.
Per CICC’s analysis, macro liquidity is flush as mainland capital—facing a shortage of quality assets—flows into Hong Kong. Local macro conditions are also loose, with declining Hibor rates freeing up liquidity. Globally, "de-dollarization" since Q2 has redirected some funds, easing external liquidity.

On the micro level, southbound and foreign capital play roles. Southbound inflows hit HK$820 billion this year (already exceeding 2024’s total), driven by retail investors (via ETFs) and trading-oriented funds. While long-term foreign money hasn’t fully returned, regional and tactical funds are making selective moves.