BDI Index Hits YTD High, HK Shipping Stocks Lead HSI, Northbound Funds Continue Adding

On July 28, 2026, the Hong Kong stock market showed structural divergence. The Hang Seng Index opened lower but fluctuated upward, closing up 0.62% at 20,435.82 points. The H-Share Index edged down 0.08%, while the Tech Index rose 1.15%. By sector, shipping stocks became the biggest highlight, stimulated by the surge in the Baltic Dry Index (BDI). COSCO SHIPPING Holdings (01919.HK) jumped 3.8%, OOIL (00316.HK) gained 2.9%, and Pacific Basin Shipping (02343.HK) followed with a 2.5% rise. Meanwhile, southbound funds recorded net buying for the fourth consecutive trading day, with a net inflow of approximately HKD 3.26 billion, significantly increasing positions in shipping, technology, and energy sectors.

BDI Index Hits Year High, Strong Global Dry Bulk Shipping Demand

As of the close on July 27, the BDI stood at 2,157 points, up 4.3% from the previous day, hitting the highest level since February 2026. Among sub-indices, the Baltic Capesize Index (BCI) surged 6.7% to 3,450 points, the Baltic Panamax Index (BPI) rose 2.1% to 1,780 points, and the Baltic Supramax Index (BSI) edged up 0.3% to 1,050 points. Analysts pointed out that the current BDI rally is mainly driven by three factors:

• Rebound in iron ore and coal shipments: With the release of restocking demand from Chinese steel enterprises, iron ore shipments from Australia and Brazil have picked up significantly. According to data from the Shanghai Shipping Exchange, iron ore shipments from Australia to China in the third week of July increased 9.2% MoM, and from Brazil to China increased 6.8% MoM. Meanwhile, coal import demand from India after the monsoon season has warmed up, driving Panamax freight rates higher.
• Active global grain trade: The latest USDA report shows that global wheat exports in the 2026/27 season are expected to increase 3.5% YoY, and corn exports to increase 2.8% YoY. After the renewal of the Black Sea Grain Initiative, Ukraine's corn exports rose to the highest level since the conflict began, and South American soybean exports also saw rush shipments due to the RMB exchange rate advantage.
• Tightening effective shipping capacity: Due to the implementation of new environmental regulations (EEXI/CII), scrapping of older vessels has accelerated, and new vessel deliveries have fallen short of expectations. Clarksons data shows that the global dry bulk fleet capacity growth in the first half of 2026 was only 1.2%, the lowest in five years. Coupled with the ongoing Red Sea diversion effect, the actual capacity shortage on some routes has not yet eased.

Citibank, in its latest research report, raised its forecast for the average BDI for full-year 2026 to 1,950 points (previously 1,750 points) and believes the supply-demand balance in the shipping industry will further improve in the second half of the year. "The current BDI level is already above the breakeven line for shipping companies, and the profitability of related enterprises is expected to be systematically restored," the bank's analyst said.

HK Shipping Stocks Valuation Repair Logic Clear; Institutions Bullish on H2 Performance

Today's collective rally in the shipping sector is a concentrated reflection of the previous valuation trough. As of July 27, COSCO SHIPPING Holdings' H-share price was only 0.72 times its net asset value per share, and OOIL's price-to-book ratio (P/B) was also below 0.8 times, significantly lower than the five-year average of 1.2 times. Pacific Basin Shipping's expected dividend yield for 2026 is as high as 5.5%, offering a high margin of safety.

DBS Bank shipping analyst Wang Lin pointed out: "There is a positive correlation between the BDI and shipping stock prices, but typically with a lag of 1-2 weeks. The current BDI has been rising for 17 consecutive trading days, while shipping stocks have lagged behind, leaving room for catch-up. More importantly, the market has not fully priced in expectations for the 2027 IMO regulations (further tightening of vessel carbon intensity indicators). At that time, the elimination of older vessels will accelerate, and the bargaining power of top shipowners will further increase."

However, investors should also be wary of short-term risks. On one hand, the BDI has entered a technically overbought zone (RSI > 70), and there may be pressure for a pullback. On the other hand, global macro demand is constrained by the high interest rate environment. If China's economic recovery falls short of expectations, iron ore and coal imports may decline. In addition, shipping stocks are sensitive to exchange rate fluctuations; the recent two-way volatility of the RMB exchange rate has increased, so investors should also pay attention to exchange gains/losses.

Northbound Funds Continue Southbound; Tech and Shipping Become Two Main Themes

Today, southbound funds recorded a net purchase of HKD 3.26 billion, of which the Shanghai-HK Stock Connect net bought HKD 1.84 billion and the Shenzhen-HK Stock Connect net bought HKD 1.42 billion. In terms of actively traded stocks, Tencent Holdings (00700.HK) received a net purchase of HKD 610 million, Meituan (03690.HK) received HKD 380 million, COSCO SHIPPING Holdings received HKD 250 million, and CNOOC (00883.HK) received HKD 190 million. Southbound funds have been net buyers for four consecutive trading days, with cumulative net inflows exceeding HKD 11 billion, indicating a recovery in mainland capital confidence in Hong Kong stocks.

Analysts believe that the northbound fund accumulation logic has two main lines: first, tech leaders based on earnings expectations; Tencent will release its Q2 earnings next week, with the market generally expecting revenue to grow 8% YoY to RMB 168 billion and non-GAAP net profit to grow 12% YoY to RMB 45 billion, with video account advertising and fintech businesses as the main growth engines. Second, cyclical sectors benefiting from the global economic recovery, including shipping, energy, and raw materials stocks, have attracted capital.

It is worth noting that among the Hang Seng Tech Index constituents today, Xiaomi Group (01810.HK) rose 2.3%, Baidu Group (09888.HK) rose 1.7%, reflecting market optimism about AI application deployment and the smart car industry chain. However, chip stocks showed divergence, with SMIC (00981.HK) edging down 0.4% and Hua Hong Semiconductor (01347.HK) down 1.1%, mainly affected by rumors of new US chip export control regulations on China.

Outlook: Shipping Boom Expected to Continue; Watch HSI Resistance at 22,000 Points

Looking ahead, the short-term trend of Hong Kong stocks will still be constrained by the external liquidity environment. The Federal Reserve will hold its FOMC meeting on July 30-31, and the market generally expects a 25 bps rate hike to the 5.50-5.75% range, but the probability of a hike in September has declined. The Hong Kong dollar exchange rate has been weak recently, once approaching the weak-side convertibility undertaking at 7.85, but the Hong Kong Monetary Authority has intervened to stabilize it, with the aggregate balance of the banking system remaining above HKD 70 billion.

For the shipping sector, Galaxy International analyst James Li said: "The sustainability of the BDI rally depends on the intensity of China's infrastructure investment. The Politburo meeting on July 24 mentioned accelerating the issuance of special bonds. If infrastructure projects accelerate in the future, it will boost demand for steel and iron ore, thereby supporting shipping freight rates. We recommend investors pay attention to swing trading opportunities in COSCO SHIPPING Holdings and Pacific Basin Shipping, while also noting the guidance from the upcoming China July official manufacturing PMI (July 31) on market sentiment."

Technically, although the Hang Seng Index stood above the 20-day moving average (20,380 points) today, the 250-day moving average (about 21,000 points) and the 22,000-point round number form double resistance. If subsequent trading volume does not expand above HKD 150 billion, a breakout will be difficult. In terms of strategy, short-term investors can buy shipping and tech leaders on dips, while medium-to-long-term investors can focus on high-dividend state-owned enterprises such as China Mobile (00941.HK) and China Shenhua Energy (01088.HK).

(Xinghang Financial News reporter Zhang Yi, July 28 report)