According to Zhitong Finance APP, Guotai Haitong Securities Co., Ltd.'s overseas strategy team released a research report stating that since the third quarter, southbound capital has continued flowing into Hong Kong stocks, with Q3 cumulative net inflows reaching HK$395.2 billion, representing an increase compared to Q2 inflow levels. At the sector level, Q3 southbound capital primarily flowed into Hong Kong's discretionary consumption, non-banking financial services, and pharmaceuticals (all experiencing net inflows from Q1-Q3) as well as software and hardware sectors (which saw net outflows in Q2). Foreign capital dominates most subsectors in Hong Kong stocks, particularly internet, financial, and most consumer sectors, while southbound capital holds stronger influence in fewer sectors such as telecommunications operators, coal and petrochemicals, defense, and semiconductors. Over the past two years, southbound capital's pricing power has significantly increased in semiconductor, broad consumption, and broad dividend sectors.
Guotai Haitong Securities' main viewpoints are as follows:
Overall Perspective: Southbound Inflows Accelerate, Foreign Outflows Decelerate
In terms of flows, since the third quarter, southbound capital has continued flowing into Hong Kong stocks, with Q3 cumulative net inflows of HK$395.2 billion, showing increased inflow magnitude compared to Q2. Foreign capital outflow rates have slowed compared to previous periods, especially stable foreign capital, with Q3 cumulative net outflows of HK$66.4 billion, representing declining outflow magnitude for three consecutive quarters.
In terms of holdings, southbound capital's market capitalization share in Hong Kong stocks continues to break through to new highs, with Stock Connect holdings rising from 20.7% at the end of Q2 to 21.8% at the end of Q3. Meanwhile, stable foreign capital's share declined from 41.3% to 40.7%, while flexible foreign capital's share remained at 19.1%.
Sector Perspective: Southbound Flows Broadly Distributed, Foreign Capital Prefers Technology
In terms of flows, Q3 southbound capital primarily flowed into Hong Kong's discretionary consumption, non-banking financial services, and pharmaceuticals (all net inflows from Q1-Q3) as well as software and hardware sectors (net outflows in Q2). Flexible foreign capital flowed into software and consumer services while flowing out of discretionary consumption, non-banking financial services, and pharmaceuticals. Stable foreign capital flowed into pharmaceuticals and hardware while flowing out of discretionary consumption, banking, and non-banking financial services.
In terms of holdings, foreign capital dominates most subsectors in Hong Kong stocks, particularly internet, financial, and most consumer sectors. Southbound capital holds stronger influence in fewer sectors such as telecommunications operators, coal and petrochemicals, defense, and semiconductors. Over the past two years, southbound capital's pricing power has significantly increased in semiconductor, broad consumption, and broad dividend sectors.
Risk Warning: Some capital flow data represents estimated values and may differ from actual circumstances.