Since the beginning of this year, the net inflow of southbound capital has exceeded HKD 1 trillion. Data shows that as of the close of trading on September 2, the daily net inflow of southbound capital was HKD 9.281 billion. Thus, the net inflow of southbound capital this year has reached approximately HKD 1,000.221 billion, exceeding HKD 1 trillion.

As of now, the cumulative net purchase of the Hong Kong stock market by southbound capital amounts to approximately HKD 4,698.012 billion.

Looking at a longer time frame, from 2020 to 2024, the net purchase amounts of southbound capital in the capital market were HKD 672.125 billion, HKD 454.396 billion, HKD 386.281 billion, HKD 318.842 billion, and HKD 807.869 billion, respectively.

A research report previously released by Goldman Sachs raised the forecast for the full-year scale of southbound capital in 2025 from USD 110 billion to USD 160 billion, approximately HKD 1.25 trillion.

Southbound capital has demonstrated strong allocation value and strategic effectiveness in the sector rotation of Hong Kong stocks. A research report from China International Capital Corporation (CICC, stock code 601995) pointed out that Hong Kong stocks are primarily composed of financial and mature internet companies, offering advantages in high dividend yields, particularly in the automotive and real estate sectors. Since 2014, southbound capital has consistently seen net inflows, and its trading volume has significantly increased its proportion in the Hong Kong stock market, reflecting the growing influence of southbound capital on the Hong Kong stock market.

Southbound capital is one of the main drivers of the rise in Hong Kong stocks this year. Scarce assets in Hong Kong stocks are mainly concentrated in internet, new consumption, innovative drugs, and dividends. The total market capitalization of software services and media in Hong Kong stocks accounts for 55% of the technology sector, with representative stocks including Tencent Holdings and Alibaba, which are internet leaders with significant AI capital expenditures.

UBS Global Wealth Management's Chief Investment Office believes that in the first half of this year, the trading volume through southbound capital accounted for 23% of the total trading volume in Hong Kong stocks, compared to 18% in 2024 and only 9% in 2020. This is mainly attributed to three factors: first, dual-listed companies such as banks offer higher dividend yields; second, Chinese internet stocks are listed in the Hong Kong market; and third, more leading A-share companies are choosing to list secondary in Hong Kong.

Against the backdrop of improving macro liquidity expectations, many institutions are optimistic about the medium to long-term trend of Hong Kong stocks. The macro team of China Merchants Securities pointed out that the pulse-like surges in Hong Kong stocks in September 2024 and late January 2025 occurred during periods of US dollar depreciation. If the US dollar index enters a depreciation channel again, coupled with strengthened expectations of Fed rate cuts, Hong Kong stocks may enter a phase of outperformance.

CICC's research report suggests that for the Hong Kong stock market, Fed rate cuts are a short-term positive, primarily reflected through liquidity and even sentiment. For example, short-term declines in US bond yields and the US dollar can directly impact the China-US interest rate spread and the liquidity of Hong Kong stocks, alleviating pressure on the Hong Kong dollar exchange rate and the tightening of Hibor (Hong Kong Interbank Offered Rate).

Wu Xinkun, Chief Overseas Strategist at Guotai Haitong, believes that looking ahead, fundamental recovery and improved capital conditions will drive Hong Kong stocks further upward, with the Hang Seng Tech sector particularly worthy of attention. Specifically, attention can be paid to internet giants benefiting from accelerated AI applications, as well as areas such as hard tech and mid-to-high-end manufacturing.