Huan Qiu Wang·2025-04-29 06:01Core Viewpoint - The Hong Kong stock market has shown strong performance since 2025, driven by the DeepSeek concept and southbound capital, with the Hang Seng Tech Index rising over 40% year-to-date [1] Southbound Capital Flow - As of mid-April, southbound capital has seen a cumulative net inflow of 604.1 billion HKD, nearing 75% of the total inflow for 2024 [3] - The size of mainland investable Hong Kong stock ETFs surged to 179 billion HKD by the end of Q1, a 45% increase quarter-on-quarter, with March alone seeing a net inflow of 23.4 billion HKD [3] - The trend indicates a significant shift towards ETF investments by individual investors, contrasting with the relatively stable growth of active equity public funds [3] Fund Holdings Structure - Public funds are increasingly concentrating on new economy sectors, with their holdings in these areas rising from 71% in Q4 2024 to 79.3% [4] - Key sectors benefiting from increased allocations include e-commerce, semiconductors, biotechnology, and media entertainment, while traditional sectors like consumer services and energy are seeing a decline [4] - The concentration of holdings among public funds has reached a five-year high, with the top three holdings (Tencent, Alibaba, SMIC) accounting for 39.8% of the market value of the top 100 holdings [4] Future Southbound Capital Potential - Projections suggest that total southbound capital inflow for 2025 could reach between 800 billion to 1 trillion HKD, with a certain increase of 200 to 300 billion HKD expected [5] - If the proportion of active equity fund holdings rises to 35-40%, it could contribute an additional 75 to 150 billion HKD [5] - The emotional-driven nature of ETF investments may increase market volatility, making precise predictions challenging [5] Market Outlook - The Hang Seng Index target scenarios include a baseline of 20,500 points, an optimistic scenario reaching 23,000 to 24,000 points, and a pessimistic scenario dropping to 18,000 to 19,000 points [6] - Investment strategies should focus on internet technology stocks with low export exposure, cyclical sectors like consumption and infrastructure if fiscal policies are strengthened, and closely monitor export-related sectors for U.S. tariff policy changes [6]