Mainland Chinese traders boost Hong Kong stock buying for fourth month as AI bets surge

Mainland Chinese investors continued to buy Hong Kong stocks for the fourth month in a row in September, with purchases rising despite challenges from high US Treasury yields and oil prices. Onshore traders invested a net HK$60.8 billion (US$7.7 billion) in Hong Kong's stocks via the Stock Connect programme last month, a significant increase from HK$10.4 billion in August, according to financial data provider Wind.

Net buying totaled HK$134.1 billion in the third quarter. Mainland investors focused on technology stocks, particularly artificial intelligence model developers, while selling healthcare shares the most. The inflows demonstrated mainland investors' enthusiasm for Hong Kong stocks, especially those unavailable on China's onshore markets, which remain more vulnerable to AI hardware companies.

The buying surge helped Hong Kong stocks hold up relatively well, with the Hang Seng Index falling 3.7% last month, even though investors worried about rising capital costs and expectations of further US rate hikes. Chinese CSI 300 Index dropped nearly 6% in September. Notable stocks bought in September included Chinese AI model developer Z.ai (Zhipu), attracting HK$6.94 billion inflows, and Baidu, the search engine operator behind Ernie Bot, receiving almost HK$6 billion.

Social media giant Tencent Holdings also drew HK$3 billion. The rebound in Hong Kong stocks gained momentum after two months of declines. Kenneth Wu, an analyst at ICBC International, noted the building strength but warned of risks such as military actions in US-Iran talks and China's weak data on consumption and investment. Hong Kong stocks may face challenges in the fourth quarter due to China's fragmented stimulus efforts, tighter US monetary policies, and the changing AI trade narrative.

The Hang Seng Index could range between 22,500 and 26,000 in the fourth quarter, with risks leaning towards the downside, according to CCB International.