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

In August, Chinese investors based on the mainland shifted their focus to Hong Kong stocks related to artificial intelligence (AI) while divesting from traditional industries, capitalizing on a market downturn to bolster their bets on cutting-edge technology. Among the Hong Kong-listed companies accessible to China's onshore investors via the Stock Connect program, MiniMax Group experienced the highest net buying, with HK$10.1 billion (US$1.29 billion) worth of shares purchased.

Alibaba Group Holding and Tencent Holdings, leading Chinese hyperscalers heavily investing in AI, trailed closely, drawing in HK$7.86 billion and HK$6.72 billion, respectively. Other stocks that faced significant selling pressures included Hua Hong Grace Semiconductor, China Construction Bank, China Life Insurance, and Industrial and Commercial Bank of China (ICBC).

The shift in investment preferences signaled the increasing allure of Chinese technology stocks listed in Hong Kong following Nvidia's latest earnings, which highlighted a resilient demand for AI infrastructure despite escalating funding costs. The Hang Seng Tech Index declined by 4.3% last month, presenting a buying opportunity for mainland traders. These traders, constituting roughly 30% of stock transactions in the city, took advantage of the 4.3% drop in the Hang Seng Tech Index, which offered a dip-buying opportunity.

Notable names among the stocks favored by mainland investors included Yangtze Optical Fibre and Cable Joint Stock, MiniMax’s competitor Z.ai, Semiconductor Manufacturing International Corp, and Xiaomi. Inflows ranged 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, China's leading on-demand delivery firm, ranked second among the most-sold stocks, experiencing net selling of HK$2 billion amid fierce competition in the food delivery market. China Construction Bank, China Life, and ICBC also suffered outflows ranging from HK$579 million to HK$1.03 billion.

Sector-wise, the information technology sector attracted the most net buying, with HK$21.8 billion in inflows. In contrast, financial firms faced the least favorable sentiment, with HK$15.4 billion in outflows. Over the past three months, mainland investors have consistently netted HK$10.4 billion in buying activity in Hong Kong stocks.

However, the buying momentum slowed down from the previous month's HK$62.9 billion inflow. Hong Kong stocks may remain relatively stable in a narrow range for the foreseeable future, as the market grapples with China's fiscal spending, the China-US leadership summit, and the Federal Reserve's rate decision later in the month, according to CGS International.