Group 1 - The net inflow of southbound funds has reached a historical high of over 910 billion HKD this year, surpassing the total for the entire year of 2024 [2][3] - The Hang Seng Index has increased by over 27% and the Hang Seng Tech Index by over 26% as of August 13, indicating strong performance in the Hong Kong stock market [1][2] - Southbound funds have shown significant interest in sectors such as financials, information technology, consumer discretionary, healthcare, and telecommunications [2] Group 2 - Major holdings of southbound funds include Tencent Holdings with nearly 560 billion HKD, and other significant positions in China Construction Bank, China Mobile, Industrial and Commercial Bank of China, and Xiaomi Group, each exceeding 200 billion HKD [2] - The top ten cross-border ETFs by net inflow this year are predominantly Hong Kong stock products, with the Huaxia Hong Kong Stock Connect Internet ETF leading with a net inflow of 33.373 billion HKD [2] Group 3 - The pricing power of Hong Kong stocks is being influenced by southbound funds, particularly in dividend stocks, while growth stocks remain a battleground for domestic and international capital [3] - The expectation is that by 2025, cumulative net inflows from southbound funds will exceed 1 trillion HKD, reflecting a growing confidence in the Hong Kong market [3] Group 4 - The Hong Kong market is viewed as being in a mid-stage of value recovery, with key sectors like internet, innovative pharmaceuticals, and new consumption still presenting investment opportunities [4][5] - The potential for further valuation recovery in the Hong Kong internet sector is anticipated, especially as the global competitiveness of Chinese technology firms is validated [5]

Core Viewpoint - Southbound capital has seen a record net inflow of over 910 billion HKD this year, indicating strong interest in the Hong Kong stock market, which has outperformed major global indices [2][4]. Group 1: Southbound Capital Inflow - As of August 12, 2023, the cumulative net inflow of southbound capital reached 910.29 billion HKD, surpassing the total for the entire year of 2024, with over 80% of trading days showing net inflows [4]. - The financial, information technology, consumer discretionary, healthcare, and communication services sectors have the highest market value holdings from southbound capital [4]. - Major holdings include Tencent Holdings at nearly 560 billion HKD, with other significant positions in China Construction Bank, China Mobile, and Industrial and Commercial Bank of China, each exceeding 200 billion HKD [4]. Group 2: ETF Inflows - The top ten cross-border ETFs by net inflow this year are all Hong Kong products, with the Huaxia Hong Kong Internet ETF leading at 33.37 billion HKD [4]. - Other notable ETFs include the Southern Hong Kong Technology 30 ETF and the E Fund Hong Kong Non-Bank ETF, each attracting over 10 billion HKD [5]. Group 3: Market Dynamics and Valuation - The pricing power of southbound capital in the Hong Kong market varies by sector, with significant influence in dividend stocks, while growth stocks remain contested between domestic and international investors [5]. - The southbound trading volume has risen to over 40% of the total trading amount for interconnect stocks, with expectations of cumulative net inflows exceeding 1 trillion HKD by 2025 [5]. - The Hong Kong market is viewed as being in a mid-stage of value recovery, with key sectors like internet and innovative pharmaceuticals still undervalued [7]. Group 4: Future Outlook - The Hong Kong stock market is expected to benefit from improved liquidity, reduced external risks, and potential policy support, leading to a narrowing of the A/H premium [7]. - The internet sector is anticipated to begin a valuation recovery from the second half of 2024, with significant growth potential for technology stocks as the market sentiment shifts from pessimism to neutrality [7].