On July 31, Hong Kong stocks saw the last trading day of the month. The Hang Seng Index closed at 24,532 points, up 0.78% on the day, bringing its monthly gain to 5.2%, the largest single-month rise since last October. The Hang Seng China Enterprises Index and the Hang Seng Tech Index rose 4.8% and 3.9% respectively, with market sentiment clearly improving.
Southbound Funds Net Inflow Nearly HK$80 Billion; Internet Sector Plays Key Role
In this rally, sustained buying by southbound funds was a key driver. Data show cumulative net inflow of around HK$79 billion in July, the highest monthly record since August 2024. Tencent, Meituan, Alibaba and other internet leaders saw the largest net buys, boosting the Hang Seng Tech Index higher amid fluctuations.
Meanwhile, high-dividend sectors also gained favor. Domestic banks, telecom operators and energy stocks received steady allocations from insurance and quantitative funds, providing solid support for the index.
Multiple Catalysts Converge; Clear Case for Hong Kong Valuation Recovery
The rally was no accident. On one hand, the Fed's July meeting sent a clear signal of a pause in rate hikes, the dollar index weakened, and global funds returned to emerging markets; on the other, mainland June economic data beat expectations, with industrial output and retail sales growth both exceeding forecasts, significantly easing concerns over China's economic recovery.
In addition, HKEX recently streamlined its listing approval process and expanded the RMB stock trading counter, enhancing market liquidity. Several brokerages noted that the Hang Seng Index's current P/E ratio remains below 10 times, a valuation trough among major global markets, highlighting its medium- and long-term allocation value.
Vietnam Funds Raise HK Stock Allocations: New Trend in Asian Capital Flows
Notably, Hong Kong stocks' low valuations and earnings improvement expectations are attracting more regional capital. A reporter learned that multiple Vietnam funds have raised the proportion of Hong Kong stocks in their portfolios to 5%-10%. At an investor forum in Ho Chi Minh City, a fund manager said, "Compared with the expensive VN Index in Vietnam, Hong Kong stocks clearly offer a better margin of safety; we will focus on internet and consumer sectors."
Analysts believe Vietnam funds' preference for HK stocks reflects Asian capital's need to reallocate regionally. As foreign capital has flowed out of Vietnam's stock market this year, some funds are rotating into Hong Kong, A-shares and Indian equities to diversify risks and capture cross-market opportunities.
Institutional Outlook: Hong Kong Stocks May Rise with Volatility in August; Watch Three Key Variables
Looking ahead to August, several brokerages are cautiously optimistic on HK stocks. CICC's strategy team noted that earnings downgrades are nearing an end and index valuations have room to rebound; if the Fed cuts rates in September, the market may get further catalysts. Meanwhile, August enters the peak earnings disclosure period, and better-than-expected results from leading stocks could drive a structural rally.
However, institutions also flagged risks, including geopolitical disruptions, international oil price volatility and short-term pressure on the renminbi exchange rate. Investors should watch southbound Stock Connect flows and changes in global risk appetite.
- Watch details of mainland pro-growth policies: whether property and consumption stimulus measures will be stepped up.
- Note the Fed's remarks at August's Jackson Hole symposium.
- Track the impact of geopolitical events in Myanmar, the Philippines and elsewhere on market sentiment.
Overall, Hong Kong stocks ended July with strong gains, and market confidence is being rebuilt. For Asian investors, HK stocks remain one of the best value-for-money choices spanning both value and growth.
