China's HK$314 Billion Stock Surge Reshapes Hong Kong Trading

• Mainland cash drives 33% of Hong Kong stock trades
• Beijing policies support Hong Kong listings and deepen ties

2024-06-12 This year, Chinese investment in Hong Kong stocks via the Stock Connect program reached HK$314 billion ($40 billion), surpassing previous figures. In May 2024, the Hong Kong Stock Exchange reported that this surge in mainland capital now drives 33% of the daily trading volume on Hong Kong’s main board, a significant increase from 12% in 2019.

Beijing's regulatory actions largely drive this increase, aiming to bolster financial integration between mainland China and Hong Kong. As a result, Chinese regulators implemented policies that encourage mainland companies to list in Hong Kong, even as the city's IPO volume hit a 20-year low.

The Stock Connect program, launched in 2014, has played a critical role in this growth. The program enables Chinese investors to access Hong Kong-listed stocks, including major technology firms like Tencent, Alibaba, and Meituan, which investors cannot directly invest in from the mainland. Significantly, over one-third of the total HK$3.5 trillion inflow since the program began has arrived in just the past year.

The Chinese government actively supports this capital movement. In January 2024, Pan Gongsheng, governor of China’s central bank, announced plans to endorse mainland companies for listing and issuing bonds in Hong Kong. He also pledged to expand yuan liquidity and the issuance of offshore yuan government bonds in Hong Kong. This announcement followed reforms that the China Securities Regulatory Commission implemented in 2023 to facilitate such listings.

According to the South China Morning Post, mainland Chinese capital, not global inflows, has primarily fueled Hong Kong’s recent market rebound, a reliance that highlights the city's deepening economic dependence on Beijing-led policies. This trend marks a shift in capital dynamics and underscores the strategic integration of Hong Kong's financial markets with mainland China’s economic ambitions.