Amid recent volatility in Hong Kong's stock market, a counter-trend wave of capital deployment is emerging.
Since early October, at least 15 new Hong Kong-themed funds have opted to close subscriptions ahead of schedule, particularly tech-focused ETFs, which have swiftly built up equity positions post-launch—a clear "fast-launch, fast-deployment" trend.
This reflects institutional investors' consensus on Hong Kong stocks' undervaluation and their proactive approach to capitalizing on market corrections.
**Accelerated Fundraising and Positioning** After peaking in October 2025, Hong Kong's market entered a correction phase. However, the downturn has not dampened capital enthusiasm; instead, it has spurred institutions to position at lower levels.
From October 10 to December 19, at least 15 new Hong Kong-themed funds announced early closures, spanning passive index funds (9), mixed equity funds (4), general equity funds (1), and QDII funds (1).
Two key trends stand out: significantly shortened fundraising periods and rapid positioning by tech ETFs.
For example, Pengyang Hong Kong Stock Connect Select Hybrid moved its deadline from January 19, 2026, to December 13, 2025—over a month early. Neuberger Berman Hong Kong Stock Connect Tech Equity Fund cut its fundraising period by more than three months, from March 6, 2026, to December 26, 2025. Other funds, including Xinyuan Hong Kong Stock Connect Navigator and China Overseas Hong Kong Stock Connect Smart Selection, also shortened their periods by over two months and one month, respectively.
Notably, newly launched ETFs are building positions at an unprecedented pace. Unlike earlier ETFs that maintained low equity exposure, recent Hong Kong Stock Connect ETFs have quickly established high positions before listing—a strong bullish signal.
For instance, ChinaAMC Hang Seng Hong Kong Stock Connect ETF (listed December 15) and GF CSI Hong Kong Stock Connect Internet ETF (listed December 15) reported pre-listing equity positions of 69.53% and 63.32%, respectively.
Thematic distribution shows a focus on high-dividend and tech sectors, accounting for over half of the early-closure funds. This highlights institutional preference for stable dividends and growth potential in the current market.
**Why the Rush?** Institutional investors attribute the trend to favorable entry points amid market corrections.
"Timing is key," said Bao Jingang, a fund manager at Rongzhi Investment. "Recent declines in heavily weighted stocks, despite solid fundamentals, offer lower entry costs."
He Jilong, CEO of Youmeili Investment, described the move as "classic left-side positioning," reflecting professional investors' confidence in valuations and long-term prospects rather than an immediate rebound.
"Funds see this correction as a window to position for next year’s opportunities," he added.
Valuations provide strong support. The Hang Seng Index's TTM P/E ratio stands at ~12x, while the Hang Seng Tech Index's is ~23x—both near 30% historical lows.
**Structural Opportunities Amid Challenges** Despite institutional optimism, Hong Kong's market has declined since early October, with the Hang Seng Index down 5.85% and the Hang Seng Tech Index dropping 18.01% from October 3 to December 19.
Analysts cite multiple factors: 1. **Liquidity expectations**: Fed officials' hawkish remarks since November dampened rate-cut hopes, impacting global capital flows and tech valuations. 2. **AI bubble concerns**: Overseas worries about U.S. AI overvaluation spilled into Hong Kong’s tech sector. 3. **Capital pressure**: Accelerated IPOs have raised over HKD 100 billion, matching daily turnover and straining liquidity. Southbound inflows also slowed sharply, dropping from ~HKD 7 billion daily to under HKD 1 billion, even turning negative at times. 4. **Profit-taking and technical adjustments**: Tech and consumer stocks’ earlier gains led to sell-offs, compounded by chip supply news.
**Long-Term Optimism and Key Sectors** Institutions remain bullish on Hong Kong’s medium-term outlook, highlighting structural opportunities: - **Tech and advanced manufacturing**: AI, semiconductors, and robotics are long-term favorites. - **High-dividend stocks**: Low rates enhance their appeal. - **Resources and cyclicals**: Copper, aluminum, and industrial metals are poised for repricing. - **Biotech and innovation**: Accelerating industry cycles and policy support offer growth. - **Consumer and healthcare**: Undervalued sectors may rebound with policy stimulus.
Bank of Communications International predicts a 2026 "slow bull" market, supported by improving liquidity from returning capital. Wei Fengchun, chief economist at China Merchants Fund, advises focusing on "profit-driven" sectors like advanced manufacturing.
In summary, while short-term pressures persist, institutions see Hong Kong’s current lows as a strategic entry point for high-conviction themes.
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