Dah Sing: Mainland investors' participation in the Hong Kong stock market has surpassed that of overseas investors.

On September 7th, Morgan Stanley released a report stating that the participation of overseas institutions in the Hong Kong stock market has decreased by one-third in 2021, while the participation of mainland investors has increased and has surpassed that of overseas investors. Morgan Stanley pointed out that the proportion of overseas institutions' participation in the Hong Kong stock market has dropped from around 40% at the end of 2020 to about 25% as of the end of August this year, with continuous outflows of funds, reducing exposure to mainland China and Hong Kong. The report shows that foreign investors were once the main participants in the market, but their participation experienced a turning point in 2021, dropping by nearly 13 percentage points. In that year, the Hang Seng H-Share Index ETF saw its largest annual decline since the 2008 financial crisis. In contrast, mainland investors have further participated in the Hong Kong stock market through the Stock Connect scheme, offsetting the decline in foreign investment participation. Currently, the participation of mainland investors accounts for about 30%. Morgan Stanley pointed out that the classification of investors is based on their own definitions and may not reflect the ultimate source of funds. The participation of individual investors has fluctuated significantly and is currently more than double the level of 2016, while the proportion of quantitative funds has shrunk to less than a quarter of what it was seven years ago.