UBS: Liquidity in Hong Kong stocks is spreading towards small and medium-sized companies. Increased participation from "Northbound" capital is helping to promote market diversification.

UBS released a research report stating that although the market capitalization and liquidity of the Hong Kong stock market traditionally focus on large-cap stocks, since the fourth quarter of 2024, they have observed a significant flow of liquidity towards smaller market segments, indicating that the tradable range of the Hong Kong stock market is expanding. For investors sensitive to trading costs and capacity, the market is becoming more operable. The bank believes that the improvement in liquidity has also led to an increase in return dispersion, providing more alpha opportunities for stock-picking investors. This trend is partly driven by the increasingly active trading activities under the Southbound Trading and the high participation of mainland retail investors. UBS further analyzed that as of April 2026, there are a total of 569 eligible stocks under the Southbound Trading, accounting for over 80% of the free float market capitalization of Hong Kong stocks, and their trading activities (including mainland and overseas investors) account for over 90% of the daily turnover of the Hong Kong stock market. With increasing liquidity, the alpha opportunities in the Hong Kong stock market are increasing.