Mainland Chinese investors buy Hong Kong tech stocks in AI pivot, sell financials

In August, Chinese mainland investors redirected their focus towards Hong Kong stocks related to artificial intelligence, while simultaneously divesting from traditional industries. The drive was fueled by a market downturn, allowing them to bolster their bets on cutting-edge technology. MiniMax Group emerged as the top beneficiary of mainland investment, with HK$10.1 billion (US$1.29 billion) in net buying, according to Wind Information data.

Alibaba Group Holding and Tencent Holdings, prominent AI adopters, followed in second and third place, attracting HK$7.86 billion and HK$6.72 billion in investments, respectively. Hua Hong Grace Semiconductor, along with China Construction Bank, China Life Insurance, and Industrial and Commercial Bank of China (ICBC), were among the stocks that bore the brunt of selling activities.

The change highlighted the attractiveness of Chinese technology stocks traded in Hong Kong, following Nvidia's latest results that showed enduring demand for AI infrastructure despite rising funding costs. The Hang Seng Tech Index declined by 4.3 percent last month, presenting a buying opportunity for mainland traders, who currently hold around 30 percent of stock transactions in the city.

Other favored stocks by mainland investors included Yangtze Optical Fibre and Cable Joint Stock, MiniMax's rival Z.ai, Semiconductor Manufacturing International Corp, and Xiaomi, with inflows ranging from HK$1.6 billion to HK$3.2 billion. Conversely, Hua Hong led the list of most-sold stocks, as Chinese onshore traders offloaded HK$3 billion worth of shares last month.

Meituan, the largest on-demand delivery firm in China, ranked second in net selling with HK$2 billion, driven by intense competition in the food delivery sector. China Construction Bank, China Life, and ICBC experienced outflows ranging from HK$579 million to HK$1.03 billion. Pop Mart International, a maker of popular Labubu toys and collectibles, also faced net selling of HK$600 million due to slowing sales.

Sector-wise, information technology experienced the highest net buying at HK$21.8 billion, while financial firms were the least favored, with an outflow of HK$15.4 billion. In August, mainland investors collectively injected HK$10.4 billion into Hong Kong stocks, marking a third consecutive month of net buying. However, the buying momentum slowed down from the previous month's HK$62.9 billion influx.

In the near future, Hong Kong stocks may trade within a narrow range, as the market navigates China's fiscal spending, the China-US leadership summit, and the Federal Reserve's rate decision later in the month, according to CGS International.