On July 27, 2026, Hong Kong Exchanges and Clearing Limited (HKEX) made a major announcement: from August 1, 2026, the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect will include 50 new exchange-traded funds (ETFs), alongside a reduction in trading fee rates. This move is seen as another milestone in the connectivity between mainland and Hong Kong capital markets, providing mainland investors with richer tools for allocating to Hong Kong stocks.
1. Policy Details: 50 ETFs Covering Diverse Sectors
According to the HKEX announcement, the newly added Stock Connect ETFs span technology, healthcare, consumption, new energy, and finance, including products tracking the Hang Seng Tech Index, Hang Seng Healthcare Index, and Hang Seng Consumer Index. HKEX also cut Stock Connect trading commissions from the current 0.15% to 0.1%, and stamp duty from 0.1% to 0.05%, aiming to lower transaction costs and boost market liquidity.
Data shows that as of end-June 2026, Stock Connect had included 26 ETFs, accounting for 35% of total HK ETF trading volume. After the expansion, the total number of Stock Connect ETFs will rise to 76, expected to attract more mainland capital into Hong Kong’s ETF market.
2. Why Allocate to Hong Kong Stocks Now? Three Key Advantages
- Valuation Discount: The Hang Seng Index currently trades at a P/E ratio of about 9.5x, below the five-year average of 12x and lower than major A-share and US indices. With the rate-hiking cycle nearing an end and China’s economic recovery expectations, the valuation recovery potential for Hong Kong stocks is significant.
- Diversified Allocation: Hong Kong offers many A-share scarce assets, such as internet giants Tencent, Meituan, and Alibaba, plus innovative drug makers and new energy companies. After the ETF expansion, investors can hold a basket of assets through a single fund to diversify risk.
- Policy Dividends: Mainland and Hong Kong regulators have continuously optimized the connectivity mechanism, such as lowering entry thresholds and expanding investment scope. The latest fee cuts directly benefit investors by boosting returns.
3. Industry Interpretation: ETFs Become a New Tool for Hong Kong Stock Investment
Professor Chen Hao of Finance at The Chinese University of Hong Kong commented: “ETFs are easy to trade, have low fees, and high transparency—ideal for mainland retail investors accessing Hong Kong stocks. Previously Stock Connect only covered individual stocks; ordinary investors lacked research on single companies and could easily fall into traps. ETFs offer one-click access to quality assets, reducing information asymmetry.” He added that the newly added ETFs include several cross-border ETFs that indirectly invest in overseas assets, further meeting mainland residents’ global allocation needs.
CICC research believes that the Stock Connect ETF expansion will significantly enhance the depth and breadth of Hong Kong’s ETF market, predicting a 50%+ increase in daily average turnover of Stock Connect ETFs over the next 12 months. Moreover, more mainland fund companies may launch wealth management products linked to these ETFs, creating a virtuous cycle.
4. Investor Guide: How to Seize the Opportunity?
For mainland investors interested in trading ETFs via Stock Connect, entry requirements are modest: first, activate Shanghai or Shenzhen Stock Connect access (account assets of at least RMB 500,000); second, search for relevant ETF codes in your trading app to buy or sell. Trading hours follow Hong Kong’s schedule (9:30-12:00 AM, 1:00-4:00 PM). Note that Hong Kong ETFs are priced in HKD; exchange rate risk is borne by investors.
Professional advisors suggest focusing on technology and healthcare themed ETFs, given their strong growth prospects and historically low valuations. High-dividend ETFs are also worth allocating, as many Hong Kong-listed SOEs offer dividend yields above 5%, which is attractive in a low-interest rate environment.
5. Outlook: Hong Kong Market Ecosystem Continuously Improves
HKEX CEO Nicolas Aguzin stated in the announcement: “We are delighted to see the ongoing upgrade of the connectivity mechanism, which will solidify Hong Kong’s role as an international financial center and super-connector.” The industry widely believes that with ETF expansion, fee cuts, and potential future inclusion of more derivatives, Stock Connect will attract additional long-term capital, supporting resilient growth in Hong Kong’s capital markets.
Amid the wave of global asset allocation, Hong Kong stocks—as a key link between mainland China and the world—are being reassessed for their investment value. The major ETF expansion has undoubtedly opened a wider door for investors: trading Hong Kong stocks may indeed be timely.
