Hong Kong Equities Exhibit Renewed Momentum Amid Sectoral Rotation

As the A-share market consolidates, the Hang Seng Index has advanced steadily, underpinned by a clear shift of capital into H-shares. A striking illustration of this trend is the Huashang Hong Kong Stock Connect Value Fund, which reached its RMB 1 billion fundraising cap within a single trading day, reflecting sustained investor enthusiasm for Hong Kong listings.

Institutional managers identify two principal drivers behind the recent inflows. First, a leading internet platform’s articulate AI growth narrative has strengthened confidence in the technology sector and drawn capital from investors with higher risk tolerance. Second, consumer behavior is evolving toward more personalized and discerning spending, providing a macroeconomic foundation for the new consumer theme.

By contrast with A-shares—which, after a sharp run-up in late August, appear poised for a period of digesting gains and sector rotation—Hong Kong equities have absorbed two months of volatility, allowing valuations of major constituents to normalize to attractive levels. This realignment has prompted portfolio reallocations toward the Hang Seng market.

Liquidity in Hong Kong is expected to ease further as the Hong Kong dollar appreciates against the U.S. dollar, reducing the need for monetary intervention by the Hong Kong Monetary Authority. Anticipated rate cuts by the U.S. Federal Reserve may direct global liquidity toward higher-yielding emerging markets, and Hong Kong is positioned to capture a portion of these flows.

Within the Hang Seng family, technology and consumer sectors stand out. Alibaba’s stock has reached a four-year high while Meituan’s valuation has stabilized, benefitting from regulatory guidance that is likely to curb excessive competition and bolster profit forecasts for leading names.

Hong Kong–listed tech giants are concurrently accelerating investments in artificial intelligence, publicly detailing R&D milestones and commercialization plans. This transparency in AI strategy has reinforced market optimism and attracted capital from investors seeking exposure to frontier technology.

Historical performance data reveal a recurring rotation between China’s ChiNext Index and Hang Seng Tech, indicating that Hang Seng Tech often experiences a catch-up rally after periods in which ChiNext outperforms by approximately 20 percentage points over a 60-day rolling window.

Should the Federal Reserve initiate a fresh easing cycle, increased liquidity could further support capital flows into Hong Kong’s technology sector—currently trading at historically modest valuations and housing core AI assets—and into large-cap financials backed by the region’s credit system.

On the new-consumer front, companies specializing in collectibles, beauty and personal care, and fine jewelry have distinguished themselves through product innovation and demonstrate durable growth attributes. Fund managers retain a cautiously optimistic stance, prioritizing the fundamentals of these businesses and the continuity of domestic policy, while selectively seeking alpha opportunities within the new-consumer universe.

Guotai Haitong Securities observes that the transition from mass-market to personalized consumption constitutes a structural dividend driven by demographic shifts and economic transformation. With its higher concentration of new-consumer themes, the Hong Kong market is well placed to benefit from this evolution, particularly following the moderation in growth-stock earnings expectations since mid-June.