Hang Seng opens lower then climbs back above 24,000; new energy and consumer stocks drive gains; southbound net buying tops HK$8B in a day

On July 31, 2026, the Hong Kong stock market staged a dramatic reversal. In early trading, the Hang Seng Index opened nearly 150 points lower due to overnight volatility in overseas markets. However, aggressive buying in the afternoon pushed the index up sharply, which eventually closed 1.2% higher at 24,112 points, successfully reclaiming the 24,000-point mark. The H-share Index rose 0.8% in tandem, while the Hang Seng Tech Index closed 1.5% higher, significantly improving market profitability.

Opened lower, closed higher; turnover rebounds

Today's Hong Kong market displayed a classic 'opened lower, closed higher' pattern. Influenced by a slight uptick in US weekly jobless claims, Asia-Pacific markets were broadly under pressure in early trading, and Hong Kong was no exception. Notably, about an hour after the open, buying gradually emerged, and index losses narrowed quickly, led by new energy vehicles and consumer stocks. In the afternoon, southbound capital accelerated inflows, turning the Hang Seng Index positive and extending gains.

In terms of turnover, today's total market turnover reached HK$187.5 billion, up about 12% from yesterday. Analysts noted that the increase in turnover during the rally indicates firm bullish conviction, and the index is expected to maintain a strong consolidation pattern in the short term.

New energy and consumer stocks soar together

From a sector perspective, funds clearly favored two main themes today: growth and turnaround plays. The new energy vehicle supply chain was particularly strong, with BYD Company (01211.HK) closing up 4.2%, Li Auto-W (02015.HK) rising 5.1%, and XPeng-W (09868.HK) gaining 3.8%. On the news front, several automakers are about to release July delivery data, and the market expects sales to continue sequential growth. Combined with stabilizing lithium battery material prices at low levels, the sector is entering a valuation recovery window.

The consumer sector also lived up to expectations. Restaurant giant Haidilao (06862.HK) surged 3.6%, while China Resources Beer (00291.HK) and Anta Sports (02020.HK) rose 2.6% and 2.9%, respectively. Data previously released by the National Bureau of Statistics showed June retail sales grew 4.2% year-on-year, beating market expectations and boosting investor confidence in the sustainability of the consumption recovery. Additionally, several regions have recently issued new rounds of consumption vouchers, providing short-term catalysts for stock prices.

Large southbound net inflows

As a key barometer for the Hong Kong market, southbound capital was particularly active today. According to data disclosed by HKEX, southbound capital recorded net buying of as much as HK$8.36 billion by the close, a one-month high. Among this, the Shanghai-Hong Kong Stock Connect channel saw net buying of HK$5.23 billion, while the Shenzhen-Hong Kong Stock Connect channel recorded net buying of HK$3.13 billion.

By industry, new energy vehicles, consumer electronics, and high-dividend bank stocks saw the largest increases in holdings. Market participants believe the continued inflow of southbound capital reflects mainland investors' demand for allocation to undervalued Hong Kong assets on the one hand, and optimism about corporate earnings recovery in the second half on the other.

Institutional view: Oscillating upward, seize structural opportunities

In response to today's market, several institutions released their latest analyses. A strategist at a major state-owned brokerage said: 'Hong Kong stocks currently remain near the 25th percentile of the past five years in valuation, offering a high margin of safety. With the US dollar index weakening and domestic policy support strengthening, the index's center of gravity is expected to continue rising.' The analyst also cautioned that with the second-quarter earnings season approaching, individual stock volatility may increase, advising investors to focus on earnings certainty.

Morgan Stanley also noted in a research report today that it maintains an 'overweight' rating on Hong Kong stocks and raised its year-end target for the Hang Seng Index to 25,500 points. It believes corporate earnings will enter an upward cycle starting in the second half, with structural opportunities in internet, consumer, new energy, and pharmaceutical sectors.

Outlook: Watch turnover and earnings season

Looking ahead, market participants generally believe the Hang Seng Index needs time to consolidate around the 24,000-point level, but the medium-term upward trend remains intact. In the short term, two factors warrant attention: first, whether turnover can consistently stay above HK$180 billion; second, the upcoming wave of interim earnings reports from Hong Kong-listed companies, which will likely result in notable divergence among individual stocks.

In terms of strategy, investors are advised to downplay index movements and focus on stock selection, prioritizing new energy supply chain companies with sustained high prosperity, consumer leaders benefiting from policy support, and high-dividend central state-owned enterprises with strong free cash flow. At the same time, investors should guard against short-term volatility from external geopolitical uncertainties.

Overall, the Hong Kong stock market on July 31, 2026 closed with a bullish candle on rising volume, ending July on a positive note. As market risk appetite improves, Hong Kong stocks in August could see more structural highlights.