Hong Kong stocks surge amid inflows from mainland Chinese funds while Fed comments fan risk appetite

Funds from mainland China buy HK$6.2 billion (US$790 million) worth of H shares on Tuesday, adding to the HK$2 billion bought on Monday

Traders step up bets on another possible rate pause in November after the Fed highlights the tightening effect from higher Treasury yields

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A screen showing various index figures inside the Hong Kong Connect Hall in May 2023. Photo: Bloomberg

Published: 10:33am, 10 Oct 2023Updated: 4:47pm, 10 Oct 2023

Hong Kong stocks advanced to near a two-week high on speculation mainland Chinese funds are snapping up undervalued stocks in the city as they returned from a one-week holiday. Risk appetite improved as some Federal Reserve officials turned less hawkish following a recent surge in Treasury yields.

The Hang Seng Index jumped 0.8 per cent to 17,664.73 at the close of Tuesday trading, the highest level since September 29. The Tech Index rose 1.3 per cent, while the Shanghai Composite Index slipped 0.7 per cent.

Alibaba Group strengthened 1.6 per cent to HK$83.40 while rival JD.com surged 1.4 per cent to HK$115.40 and Meituan jumped 3.1 per cent to HK$112.30. New World Development gained 0.9 per cent to HK$15.10, while Henderson Land jumped 2.2 per cent to HK$20.75 amid bets on market-easing measures.

Funds from mainland China bought HK$6.2 billion (US$790 million) worth of H shares on Tuesday, adding to the HK$2 billion net buy in typhoon-interrupted trading on Monday, according to Stock Connect data. They bought US$18.6 billion worth of Hong Kong-listed shares in the third quarter, or triple the amount in the preceding three months, according to Goldman Sachs.

“Buy H-shares and [the] Hang Seng Tech Index for a potential year-end bounce,” Goldman strategists including Si Fu said in a note on Monday. Cheap valuations and strong inflows from mainland investors will provide local stocks with significant near-term outperformance potential, they added.

More funds are predicting better returns on Chinese stocks in the months ahead, according to investors including Matthews International and Value Partners. China’s economic recovery gathered momentum last month, while tensions in US-China ties are set to ease following efforts to step up meetings among top officials.