Quan Jing Wang·2025-08-13 05:51Core Viewpoint - The article discusses the strong performance of the Hong Kong stock market in the first half of 2025, driven by various factors, and suggests that this upward trend is likely to continue, particularly in the technology sector and through investment vehicles like ETFs [1][2][3]. Group 1: Factors Driving the Strength of Hong Kong Stocks - The Hong Kong stock market has shown strong performance, with the Hang Seng Index rising by 21% and the Hang Seng Tech Index increasing by 22% as of June 11, 2025 [2]. - Four main factors are identified as driving this strength: improved trade quality post-2018-2019 trade tensions, strong economic data post-tariff implementation, accelerated capital inflow from mainland investors, and attractive valuation levels compared to historical averages [2][3][4]. - As of June 16, 2025, the cumulative net inflow of mainland funds into the Hong Kong stock market reached 643.8 billion yuan, significantly higher than previous years [2]. Group 2: Investment Opportunities in Hong Kong Stocks - The characteristics of Hong Kong stocks include new vitality, high dividends, and low valuations, making them attractive for investment [5]. - The market has seen a significant increase in the market capitalization of new economy sectors, rising from 24.17% in 2015 to over 40% in June 2025 [5][6]. - The Hang Seng Index's price-to-earnings (PE) ratio is reported at 10.37, lower than the Shanghai Composite Index at 14.49, indicating a relative valuation advantage [8]. Group 3: Insurance Capital and Dividend Strategies - There has been a notable trend of insurance companies increasing their holdings in high-dividend stocks, with 15 instances of shareholding increases reported by seven insurance companies by May 31, 2025 [10][11]. - Insurance companies prefer dividend-paying assets due to accounting standards that allow for smoother profit reporting and the need to match long-term liabilities with stable cash flows [11][12]. - The S&P Hong Kong Low Volatility Dividend Index has a dividend yield of 6.02%, making it an attractive option in a low-interest-rate environment [12]. Group 4: Investment Strategies for Retail Investors - Retail investors are advised to consider dividend assets and low-volatility strategies, utilizing ETFs to diversify risk while seeking stable income [14][15]. - The S&P Hong Kong Low Volatility Dividend Index selects stocks based on high dividend yields and low volatility, ensuring a defensive investment approach [15][17]. - The index also incorporates quality filters to avoid high dividend traps, ensuring that dividends are sustainable and not a result of declining stock prices [17]. Group 5: Paths for Mainland Investors to Access Hong Kong Stocks - Mainland investors can access Hong Kong stocks through three main channels: opening a Hong Kong Stock Connect account, investing in ETFs, or using cross-border wealth management products [23]. - The Stock Connect program requires investors to meet certain asset and risk tolerance criteria, while ETFs provide a lower entry barrier and diversified exposure to the market [23].