Overseas: Southward inflow accelerates Hong Kong stocks, foreign capital favors technology.

Guotai Haitong's overseas strategy team released a research report stating that since the third quarter, southbound capital continues to flow into Hong Kong stocks, with a net inflow of 395.2 billion Hong Kong dollars in Q3, an increase from the inflow in Q2. Looking at the industry level, in the third quarter, southbound capital mainly flowed into Hong Kong stocks in the sectors of optional consumption/non-banking/medicine (net inflow for Q1-Q3) and software/hardware (net outflow in Q2). Foreign capital dominates the majority of sub-sectors in the Hong Kong stock market, especially in the internet, financial, and most consumer sectors; while southbound capital holds strong influence in a few sectors such as telecommunications, coal and petrochemicals, defense, and semiconductors. In the past two years, the pricing power of southbound capital in the semiconductor/consumer/dividend sectors has significantly increased. Guotai Haitong's main points are as follows: Overall perspective: Accelerating southbound inflows, slowing foreign outflows In terms of flow, since the third quarter, southbound capital continues to flow into Hong Kong stocks, with a net inflow of 395.2 billion Hong Kong dollars in Q3, an increase from the inflow in Q2; the rate of foreign outflow has slowed down compared to previous periods, especially for stable foreign investors, with a net outflow of 66.4 billion Hong Kong dollars in Q3, a decrease in outflow for three consecutive quarters. In terms of stock, the shareholding value of southbound capital in Hong Kong stocks continues to increase and reach new highs, with the shareholding amount through the Hong Kong Stock Connect increasing from 20.7% at the end of Q2 to 21.8% at the end of Q3; at the same time, the share of stable foreign investors decreased from 41.3% to 40.7% and flexible foreign investors remained at 19.1%. Industry perspective: Broad southbound flows, foreign preference for technology In terms of flow, in the third quarter, southbound capital mainly flowed into Hong Kong stocks in the sectors of optional consumption/non-banking/medicine (net inflow for Q1-Q3) and software/hardware (net outflow in Q2); flexible foreign investors flowed into software/consumer services, while flowing out of optional consumption/non-banking/medicine; stable foreign investors flowed into medicine/hardware, while flowing out of optional consumption/banking/non-banking. In terms of stock, foreign investors dominate in most sub-sectors of Hong Kong stocks, especially in the internet, financial, and most consumer sectors; while southbound capital holds strong influence in a few sectors such as telecommunications, coal and petrochemicals, defense, and semiconductors. In the past two years, the pricing power of southbound capital in the semiconductor/consumer/dividend sectors has significantly increased. Risk warning Some of the fund data are estimates and may differ from the actual situation.