On July 28, 2026, the Hang Seng Index initially fell nearly 1% in morning trade but recovered in the afternoon, lifted by sustained southbound fund inflows, closing up 0.3% at 26,580 points. Net buying via Stock Connect (Shanghai + Shenzhen) reached HKD 32.27 billion, a single-day high for the year and the third-highest ever. Funds mainly flowed to tech and consumer stocks. Tencent Holdings (00700.HK) saw net buying of HKD 4.18 billion, and Meituan-W (03690.HK) received HKD 2.83 billion, together accounting for over 20% of southbound flows.
Why the sudden surge in southbound fund inflows?
Analysts believe the large southbound inflows were driven by three factors. First, the RMB strengthened against the USD, with the onshore rate briefly breaking 6.70 on July 28, a near two-year high. Rising RMB asset appeal prompted mainland funds to allocate to relatively undervalued HK stocks via Stock Connect. Second, after previous corrections, HK tech stock valuations fell to historical lows. Tencent's current P/E ratio is only about 18x, far below its 5-year average, leading southbound funds to buy the dip. Third, HKEX data shows average daily Stock Connect turnover in July rose 25% from June, indicating a clear market sentiment recovery.
Tencent and Meituan become capital magnets
Regarding individual stocks, Tencent's turnover reached HKD 18.2 billion, with over 40% via Stock Connect. The company will release interim results next week; the market expects Q2 revenue to grow about 8% YoY and net profit to increase over 15%. Meituan-W benefited from local services consumption recovery, with institutions forecasting 12% growth in its core business revenue for Q2. Additionally, traditional blue chips like China Mobile (00941.HK) and China Construction Bank (00939.HK) also saw southbound buying, with net purchases exceeding HKD 1 billion each.
HSI resilience stands out; what lies ahead?
Despite overnight US market declines and broad pressure in Asia-Pacific, Hong Kong stocks showed strong resilience thanks to southbound fund support. The HSI fell to 26,320 in early trade but rebounded led by tech stocks. The Hang Seng Tech Index rose 1.1% to close at 6,850, with JD.com-SW (09618.HK) gaining over 3% to lead. Looking ahead, multiple brokerages shared views. CICC believes HK stocks are undervalued among major global markets, and sustained southbound flows will drive valuation repair. However, attention should be paid to potential hawkish signals from the Fed's meeting next week and uncertainties from Sino-US relations.
Sector rotation emerges
In terms of fund flows, aside from tech, biotech and new energy sectors also attracted some southbound funds. BeiGene (06160.HK) rose 2.5%, Innovent Biologics (01801.HK) up 1.8%. In new energy, BYD Co. (01211.HK) edged up 0.5%, but solar stocks diverged. Analysts note that sector rotation shows investors are chasing tech leaders with strong earnings visibility while also positioning in high-growth sectors.
Stock Connect turnover share hits record high
Post-market data from HKEX shows that on July 28, Main Board total turnover was HKD 245 billion, of which Stock Connect turnover reached HKD 98 billion, accounting for 40%, a record high. This indicates the growing influence of mainland funds on HK stock pricing. As of July 28, 2026, cumulative net buying via Stock Connect this year has exceeded HKD 1.2 trillion, up 30% year-on-year.
