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Julie Zhang

Chinese mutual funds have reduced their Hong Kong stock holdings via the southbound Stock Connect to a more than two-year low in the second quarter, despite a lot of money moving southward over the same period.
The share of Hong Kong stocks in their portfolios fell to 23.3 per cent in the second quarter of this year, which was lower than the 23.9 per cent posted two years earlier, according to a report published by investment bank China International Capital Corporation on Thursday.
It also marked a sharp fall from 34.7 per cent in the first quarter.
The investment bank revealed its findings by tracking 5,163 mainland mutual funds, which collectively managed 4.4 trillion yuan (US$649.98 billion) in assets. It did not include investments by Qualified Domestic Institutional Investor (QDII) funds.
Mainland mutual funds held Hong Kong-listed shares worth 649.1 billion yuan by the end of June, down about 23 per cent from three months earlier.
Southbound flow, where mainland investors buy and sell Hong Kong-listed shares, remains one of the key liquidity drivers in the Hong Kong stock market, said Mike Leung Kit-man, a director at Wocom Securities.
“Such inflows from mainland buyers raise trading volumes, often accounting for nearly 25 per cent of the daily equities turnover in the Hong Kong market.”
The move of “Chinese mutual funds become more important during periods of offshore market volatility”, Leung added.
The Hang Seng Index, Hong Kong’s stock benchmark, has dropped about 7 per cent in the first half of the year.
Semiconductor and technology-hardware stocks saw the largest gains in portfolio weighting, while media and entertainment, energy, and e-commerce shares all declined markedly, according to the CICC report.
The percentage of fund holdings in the new economy sector rose to 79.4 per cent in the second quarter from 68.7 per cent in the first quarter.
Printed circuit board and laminates manufacturer Kingboard Holdings was among the largest beneficiaries amid soaring capital expenditure by artificial intelligence hyperscalers. Its Hong Kong-traded stocks surged about 64 per cent in the first six months. Meanwhile, the shares of GigaDevice Semiconductor jumped about 89 per cent over the same period.
E Fund Management remains China’s largest mutual fund manager, overseeing more than 4.2 trillion yuan in assets under management as of March 31. It increased its stake in gene-editing biotechnology firm Biocytogen Pharmaceuticals to 7 per cent after buying an additional 91,500 shares on July 2, joining a wave of Chinese mutual funds boosting their exposure to the country’s biotech sector.
Average daily turnover for southbound Stock Connect trading reached HK$123.1 billion (US$15.7 billion) in the first half, up 10.9 per cent year on year, according to data from Hong Kong Exchanges and Clearing.


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Chinese mutual funds shifted focus amid market volatility, cutting their share of Hong Kong stocks to 23.3 per cent in the second quarter


Chinese mutual funds shifted focus amid market volatility, cutting their share of Hong Kong stocks to 23.3 per cent in the second quarter.


Chinese funds cut Hong Kong stock holdings to 2-year low despite strong southbound flow

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Chinese mutual funds shifted focus amid market volatility, cutting their share of Hong Kong stocks to 23.3 per cent in the second quarter

Chinese mutual funds shifted focus amid market volatility, cutting their share of Hong Kong stocks to 23.3 per cent in the second quarter