Despite recent volatility in Hong Kong stocks, investment enthusiasm has remained strong this year, driving continuous expansion of Hong Kong stock funds. Research data shows that by the end of Q3, the scale of Hong Kong stock funds exceeded the trillion-yuan mark, reaching RMB 1,033.008 billion, a 67.98% increase compared to Q2. (Data is for illustrative purposes only and does not constitute investment advice. Funds carry risks; invest with caution.)

Qu Shaojie, manager of the Great Wall Hong Kong Stock Connect Value Select Fund, believes that southbound capital represented by public funds has gradually become a key supporting force for the Hong Kong market. Key drivers include significant valuation advantages, structural benefits of Hong Kong stocks, and the growing appeal of Chinese assets.

1. What drives the trillion-yuan expansion of Hong Kong stock funds? Qu Shaojie highlights three main factors: 1) **Valuation advantages**: Hong Kong stocks remain undervalued globally. As of November 10, 2025, the Hang Seng Index's P/E (TTM) stands at 11.97x, notably lower than Germany’s DAX (18.44x) and the UK’s FTSE 100 (20.23x). Its dividend yield of 3.05% also outshines the S&P 500’s 1.11%, attracting sustained capital inflows. 2) **Structural benefits**: Hong Kong’s market uniquely balances defensive and growth-oriented allocations, aligning with barbell strategy needs. High-dividend blue chips (e.g., ~6% yields) suit defensive plays amid rate cuts, while tech, biotech, and new-consumer sectors host China’s most innovative firms, offering growth exposure. 3) **Rising appeal of Chinese assets**: As a hub for China’s top-tier growth and value stocks, Hong Kong benefits from economic recovery and tech breakthroughs, drawing both global and mainland investors seeking to tap into China’s high-quality development.

2. Tech, particularly "Internet + AI" computing, dominates Hong Kong funds by Q3-end. What’s your take? Qu notes that Hong Kong-listed tech firms lead China’s AI advancements, with core technologies gaining global competitiveness. As AI drives the next tech revolution, China’s leadership potential in innovation and application solidifies the sector’s long-term investment case.

**Other key sectors**: 1) **High-dividend stocks**: With global rates declining, these assets offer stable returns and potential capital appreciation. 2) **Biotech**: China’s biotech sector is transitioning from follower to innovator, with breakthroughs now licensed overseas—a historic shift. 3) **New consumer**: Hits like *Black Myth: Wukong* and trendy toys (e.g., Labubu) showcase China’s cultural IPs going global, unlocking vast market potential.

**Disclaimer**: Information herein is sourced from reliable channels but accuracy isn’t guaranteed. Views may change without notice. This material shouldn’t replace independent judgment or guide investment decisions. No liability is accepted for losses arising from its use. Unauthorized distribution or modification is prohibited.

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