Institutions Bullish On Hong Kong Stocks As Spring Rally Builds; Domestic And Foreign Capital Increase ETF Allocations

Trading activity in Hong Kong equities has steadily recovered since the start of the year, with the Hang Seng Index’s short‑term average daily turnover returning to the HKD 250 billion range. Against a backdrop of improving macro expectations and capital replenishment, a growing number of institutional investors are expressing confidence in a spring rebound.

CMB International’s latest strategy note highlights that potential further reserve‑requirement and interest‑rate cuts by the central bank, together with a short‑term strengthening of the renminbi against the U.S. dollar, could catalyze a seasonal equity rebound, with low‑valuation value names and defensive sectors likely to outperform. Zheshang Securities projects that, as Federal Reserve balance‑sheet pressures ease and domestic economic recovery lifts risk appetite, Hong Kong’s technology sector is well positioned for a recovery.

Foreign investor interest in Chinese assets has also re‑emerged following the New Year holiday. Media reports indicate that global brokerages such as JPMorgan have recently increased holdings in Hong Kong stocks, accumulating leading names across new energy, biopharmaceuticals and communication services, including Contemporary Amperex Technology Co., Ltd. (CATL), Ganfeng Lithium and Cinda Biopharmaceutical. Concurrently, China‑focused ETFs listed overseas have shown notable activity, attracting additional attention from international investors. As of the close on January 9, large China ETFs such as the KraneShares China Overseas Internet ETF (KWEB) recorded year‑to‑date gains that outpaced broad indices including the S&P 500 and the Hang Seng Tech Index, delivering measurable excess returns.

Research tracked by Guotai Haitong indicates that in the final week of 2025 long‑term foreign investors had already begun to increase allocations to Hong Kong sectors such as software, telecommunications and non‑ferrous metals, with stable foreign inflows reaching HKD 8.3 billion that week. On the domestic front, several Hong Kong‑themed ETFs have attracted substantial capital during recent market volatility. The Hong Kong Stock Connect Innovative Drug ETF managed by E Fund (159316) recorded average daily turnover above RMB 600 million this week, a marked increase from prior weeks, while the Hong Kong Securities ETF managed by E Fund (513090) has averaged daily turnover in excess of RMB 10 billion since the start of the year, underscoring active positioning by investors.

Taken together, these flows show that both domestic and international investors are using ETFs to increase exposure to Hong Kong equities during the market’s consolidation phase, reflecting broad expectations for further upside. Zheshang Securities recommends that investors monitor new consumption sectors likely to benefit from anticipated Fed easing and domestic recovery, as well as technology names with growth potential amid the AI cycle. China International Capital Corporation (CICC) similarly notes that the reconfiguration of the international monetary order, AI’s move into critical application stages, and the earnings realization of China’s innovation industries should continue to underpin Chinese asset performance.