Mainland Chinese Investors Gain Greater Influence in Hong Kong’s Stock Market

Mainland Chinese investors are playing an increasingly significant role in Hong Kong’s stock market, helping to drive trading activity and narrow the valuation gap between the city’s shares and their onshore counterparts, Bloomberg reports.

This growing influence has contributed to a strong market rally in 2024 and provided some stability amid global economic uncertainties.

Southbound trading—investments from mainland China into Hong Kong-listed shares—accounted for approximately 46% of the average daily turnover in February, up from about one-third a year ago, according to Bloomberg-compiled data. Mainland investors now own nearly 12% of Hong Kong stocks, more than doubling their stake from less than 5% at the end of 2020.

Fueled by optimism in artificial intelligence and major tech companies such as DeepSeek, mainland traders have been buying up shares of Chinese tech giants listed in Hong Kong. This influx of capital has helped reduce the “A-H premium”—the price difference between mainland-listed A-shares and Hong Kong-listed H-shares—to 34%, below the five-year average of 42%.

The increasing presence of mainland investors is reshaping Hong Kong’s stock market dynamics. Analysts suggest that southbound capital is now playing a key role in setting stock prices.

“Southbound capital has already seized the pricing power of Hong Kong stocks,” said Wang Sheng, an analyst at Shenwan Hongyuan Securities Co.

In February alone, mainland investors bought a net HK$153 billion ($19.7 billion) worth of Hong Kong shares, marking the second-largest monthly purchase on record. This shift has helped offset weaker foreign investor demand, which has remained subdued due to global economic concerns and ongoing US-China trade tensions.

The impact of global events—such as former US President Donald Trump’s recent tariff threats—continues to create volatility in Asian markets. However, the growing southbound inflows could provide a stabilizing effect for Hong Kong stocks, which are often seen as indicators of external risks and global investor sentiment.

“It helps to mitigate some of the lackluster foreign flows,” said Xin-Yao Ng, an investment director at abrdn plc. “And it does help that the Hong Kong stocks are generally cheaper than the A-shares.”

Despite this, some experts caution that mainland investment patterns can be unpredictable.

“I wouldn’t bet on it to be sustained capital support for the Hong Kong market,” Ng added.