Southbound Stock Connect flows surge to record US$152b driven by Hong Kong’s IPO revival
Southbound Stock Connect flows, through which mainland Chinese investors buy Hong Kong listed shares, hit a record high in the past year, reflecting strong confidence in the city’s market on the back of a booming pipeline of initial public offerings (IPO). In the 12 months to March this year, mainla
By Julie Zhang
Southbound Stock Connect flows, through which mainland Chinese investors buy Hong Kong listed shares, hit a record high in the past year, reflecting strong confidence in the city’s market on the back of a booming pipeline of initial public offerings (IPO).
In the 12 months to March this year, mainland investors snapped up HK$1.19 trillion (US$151.8 billion) worth of shares in Hong Kong, according to the Securities and Futures Commission’s (SFC) annual report published on Wednesday.
Average daily turnover of southbound inflows jumped 84 per cent year on year to HK$124.1 billion, equivalent to 24 per cent of the city’s total market turnover, up from 20 per cent a year earlier, the report said.
“Global capital flows will continue to be influenced by macroeconomic uncertainty, geopolitical shifts, rapid technological advances including digital finance and artificial intelligence, and the transition to a more sustainable economy,” said SFC chairman Kelvin Wong Tin-yau in a statement.
“Amid emerging challenges, the SFC will stay focused on its strategic priorities to entrench Hong Kong’s irreplaceable position as the vital financial gateway bridging the mainland and the world,” Wong said.
SFC CEO Julia Leung Fung-yee said: “In this ever-changing landscape, we are more committed than ever to fostering resilience as a powerful engine to support market transformation and technological innovation.”
Over the same period, average northbound trading accounted for 6.3 per cent of mainland market turnover, according to the report. Since Stock Connect’s launch in 2014, cumulative trading flows have reached HK$5.3 trillion southbound and 1.47 trillion yuan (US$216.8 billion) northbound.
Northbound average daily turnover, covering both stocks and exchange-traded funds (ETFs), rose 32.1 per cent to 395.27 billion yuan in May, while southbound average daily turnover climbed 23.9 per cent to HK$133.67 billion, the Hong Kong stock exchange website showed.
Mike Leung Kit-man, a director at Wocom Securities, expected market confidence in Hong Kong’s status as an international financial hub to be sustained over the rest of the year.
“In the past few years, supported by government policy, many high-quality mainland companies have come to Hong Kong to list, such as CATL and Zhipu. This group of quality firms attracts global capital,” Leung added.
A total of 59 listings on the Hong Kong stock exchange in the first five months of the year raised US$20.42 billion, according to LSEG Data & Analytics. This follows a revival last year, when 114 companies raised US$37.22 billion on the exchange’s main board, cementing Hong Kong’s position as the world’s top bourse for IPOs.
“The current Hong Kong IPO resurgence is not a simple cyclical rebound,” said William Chow, deputy group CEO of Hong Kong-based Raffles Family Office. “It represents a new market regime shaped by mainland China capital flows, southbound liquidity and A+H dual listings.”
The SFC report also showed that average daily turnover in ETFs and leveraged and inverse products surged 50.6 per cent year on year to HK$38.1 billion, while tokenised investment products saw a nearly six-fold year-on-year gain to HK$10.8 billion as of March.