On July 28, 2026, Hong Kong stocks continued their volatile trend, with the Hang Seng Index closing at 18,250 points, down about 5% year-to-date. However, against the backdrop of persistently low valuations, southbound funds accelerated their inflow. As of July 27, southbound funds had accumulated a net purchase of over HKD 80 billion in Hong Kong stocks in July, setting a new single-month high for the year. This phenomenon has sparked widespread market discussion: Why are mainland investors increasing their positions against the trend when the index is performing poorly? Has Hong Kong stocks ushered in a "value pocket"?
Low Valuation: Core Attractiveness of Hong Kong Stocks
The current price-to-earnings (PE) ratio of the Hang Seng Index has fallen to 9.8 times, below the ten-year average of 11.5 times, and the price-to-book (PB) ratio has broken below 1 time, at an extremely low historical percentile. Compared with A-shares (CSI 300 PE ratio of about 13 times) and US stocks (S&P 500 PE ratio of about 22 times), the valuation advantage of Hong Kong stocks is extremely prominent. From a dividend yield perspective, the average dividend yield of the Hang Seng Index has risen to 4.2%, far exceeding A-shares (2.5%) and US stocks (1.8%), naturally attracting funds seeking stable returns.
Veteran Hong Kong stock analyst Wang Ming (pseudonym) pointed out: "The low valuation of Hong Kong stocks essentially reflects excessive pessimism about Sino-US relations, Hong Kong's economic recovery, and liquidity tightening. However, the fundamentals of many high-quality companies have not deteriorated; instead, they reward shareholders through buybacks and dividends. For long-term capital, this provides an excellent margin of safety."
It is worth noting that Hong Kong stocks include many leading Chinese internet companies such as Tencent, Meituan, Alibaba, and Xiaomi, whose valuations are even lower than their A-share counterparts. For example, Tencent Holdings (00700.HK) has a forward PE of only 15 times, while comparable technology stocks in A-shares generally have multiples above 30 times. This structural discount provides opportunities for cross-market arbitrage.
Dense Listings of New Economy Companies: Increased Variety of Targets
In the first half of 2026, the Hong Kong Stock Exchange welcomed 17 IPOs of new economy companies, covering biotech, new energy, artificial intelligence, and other fields. Among them, the AI chip-focused startup "Xinsuan Technology" surged 40% on its debut, boosting market sentiment. In addition, the "Special Technology Company Listing Rules" introduced by HKEX in 2025 continue to attract unprofitable tech companies to list in Hong Kong, further enriching investment targets.
Compared with A-shares, Hong Kong stocks are more international in terms of industry layout. Hong Kong stocks include a large number of multinational enterprises from Southeast Asia and Europe, as well as secondary listing targets of Chinese concept stocks. Investors can easily allocate global assets in Hong Kong stocks while enjoying lower trading thresholds.
Flexible Trading Mechanism: T+0 and No Price Limits
Hong Kong stocks implement T+0 trading (buy and sell on the same day) and have no 10% price limit like A-shares. This means investors can respond more flexibly to market fluctuations, especially suitable for short-term traders. In addition, Hong Kong stock trading hours cover morning, afternoon, and after-hours auction periods, with an average daily trading duration of about 6.5 hours, slightly longer than A-shares.
In terms of fees, brokerage commission rates for Hong Kong stocks are generally lower than A-shares (some brokers as low as 0.025%), and no stamp duty is required (only 0.13% ad valorem tax, actually paid by buyers and sellers at 0.1% and 0.13% respectively; amendment: Hong Kong stamp duty has been reduced to 0.1% since 2023). However, Hong Kong stock trading involves exchange rate fluctuation risk (Hong Kong dollar is pegged to the US dollar), and some scam stocks (penny stocks) have liquidity traps.
Key Differences from A-shares: What Investors Need to Know?
Despite obvious advantages, the risks of Hong Kong stocks cannot be ignored. First, Hong Kong stocks are dominated by institutional investors (accounting for about 70%), leaving individual investors at a disadvantage in information access and professionalism. Second, Hong Kong stocks are more volatile; in July 2026, the Hang Seng Index experienced intraday swings exceeding 3% on multiple occasions. In addition, the Stock Connect has daily quota limits (Shenzhen-HK Connect and Shanghai-HK Connect each have RMB 42 billion), and funds after selling take T+2 days to transfer back to the mainland.
In terms of account opening, mainland investors can open Hong Kong stock accounts through Stock Connect (requires asset threshold of RMB 500,000) or directly via internet brokers (such as Futu, Tiger). It is recommended that beginners first participate through Stock Connect to reduce complexity.
Risk Warning and Rational Decision-Making
Low valuation does not mean stock prices will necessarily rise. Hong Kong stocks are heavily influenced by geopolitical factors such as Fed policy and Sino-US relations, and there is a short-selling mechanism. Investors should avoid blindly bottom-fishing and need to make comprehensive judgments based on individual stock fundamentals, industry outlook, and capital conditions. It is recommended that the allocation ratio not exceed 20% of total assets, and prioritize high-dividend blue chips or ETFs (such as Hang Seng ETF, Hang Seng Tech ETF).
Overall, the current low valuation of Hong Kong stocks provides a rare window for allocation, but investment requires caution. For long-term value investors, Hong Kong stocks are an important choice for diversifying risk and locking in cost-effective assets.
