Hong Kong Stocks Investment Now: Southbound Funds Net Bought Over 80 Billion in July, Shipping Sector Favored

On July 25, 2026, the latest data from the Hong Kong Stock Exchange showed that as of July 24, southbound funds had accumulated net purchases of Hong Kong stocks exceeding HKD 80 billion in the month, setting a new monthly net buying high for the year. Among them, the shipping sector became a key inflow direction, with COSCO Shipping Holdings, Orient Overseas International, and other stocks receiving significant additions. This trend has once again sparked widespread discussion on the investment value of Hong Kong stocks.

Why are southbound funds pouring into Hong Kong stocks?

Since the second quarter of 2026, the Hong Kong stock market has continuously attracted mainland funds. In July, the daily average net buying of southbound funds exceeded HKD 4 billion, up about 30% from the daily average in the first half of the year. Analysts believe multiple factors combined to drive this capital inflow:

• Valuation gap effect: The current P/E ratio of the Hang Seng Index is only 9.5 times, lower than the CSI 300's 12 times and the S&P 500's 22 times. Hong Kong stocks have a clear valuation advantage among major global markets.
• High dividend appeal: The average dividend yield of Hong Kong-listed companies exceeds 3.5%, with some state-owned enterprises and financial stocks yielding as high as 6%-8%, highly attractive to investors seeking stable returns in a low-interest-rate environment.
• International asset allocation demand: As mainland investors' willingness for global allocation increases, Hong Kong stocks, as an offshore market, offer opportunities to access multinational companies and hedge against exchange rate risks.
• HKEX reform dividends: Measures introduced by the HKEX since 2024, such as the listing mechanism for specialist technology companies (Chapter 18C) and lower trading thresholds, have boosted market vitality and attracted more new economy companies.

Why does the shipping sector stand out?

In the industry distribution of southbound funds, the shipping sector's net buying in July exceeded HKD 12 billion, accounting for about 15%, making it one of the sectors with the largest net capital inflow. This is closely related to the recovery in global shipping market activity.

The BDI (Baltic Dry Index) rebounded from a low of 1800 points in May 2026 to the current 2600 points, an increase of over 44%. Meanwhile, the China Containerized Freight Index (CCFI) has also been rising, reflecting global trade recovery and supply chain tightness. Shipping companies' improved profitability, coupled with their tradition of high dividends, has made the sector a key focus for southbound funds.

Stock performance: COSCO Shipping Holdings favored by funds

COSCO Shipping Holdings (01919.HK) saw its stock price rise 12% cumulatively in July, with the shareholding ratio of southbound funds increasing from 18.5% at the beginning of the month to 20.2%. The company's net profit in the first quarter of 2026 grew 25% year-on-year, and it announced an interim dividend plan of HKD 2.5 per 10 shares. Orient Overseas International (00316.HK) also attracted fund attention, with net buying by southbound funds exceeding HKD 1.5 billion.

Risks and considerations for Hong Kong stock investment

Despite many advantages, investors should be aware of the following risks:

• Liquidity risk: Some small and mid-cap stocks in the Hong Kong market have daily trading volumes of less than HKD 1 million, with large bid-ask spreads, which can lead to high transaction costs.
• Exchange rate fluctuation: The Hong Kong dollar is pegged to the US dollar, but fluctuations in the renminbi exchange rate can affect actual investment returns. Since 2026, the renminbi has appreciated about 3% against the US dollar, which may weaken Hong Kong stock returns.
• Different trading rules: Hong Kong stocks have no price limits, T+0 trading, and no stamp duty (abolished in 2023), unlike A-shares. Investors need to be familiar with these rules.
• Policy risk: Geopolitical changes and Sino-US relations may affect the sentiment of the Hong Kong stock market.

How to invest in Hong Kong stocks?

Mainland investors can directly invest in Hong Kong stocks through the Hong Kong Stock Connect (Shanghai-HK Stock Connect, Shenzhen-HK Stock Connect), or indirectly through Hong Kong stock funds and ETFs. Currently, the Stock Connect covers about 500 stocks, including major blue-chips and some small and mid-cap companies. The account opening process is simple, requiring only activation at a broker that supports Stock Connect.

Investment advice

For investors seeking global allocation, Hong Kong stocks are a low-cost, efficient starting point. It is recommended to focus on low-valuation, high-dividend blue-chip stocks and the shipping sector benefiting from global trade recovery. At the same time, diversify investments, control positions, and avoid single-industry risk.

With the continued inflow of southbound funds and the optimization of HKEX rules, the Hong Kong stock market is expected to see a valuation recovery in the second half of 2026. Investors should seize the current window and allocate rationally.