Mainland retail traders are being lured by the outperformance of the city’s equities, combined with their accessibility and abundance of new products to choose from
[HONG KONG] Hot themes from artificial intelligence (AI) to biotech have driven Chinese investors to pour record amounts of cash into locally listed exchange-traded funds (ETFs) that track Hong Kong stocks, a trend that analysts say is likely to continue.
Inflows into onshore-listed Hong Kong ETFs have reached over US$26 billion so far this year, with an accelerated buying spree since June, Bloomberg Intelligence-compiled data show. Mainland retail traders are being lured by the outperformance of the city’s equities, combined with their accessibility and abundance of new products to choose from.
“Many young Chinese investors are buying ETFs through apps such as Alipay, and they may not even need to open a securities account,” said Shihao Li, a China strategy research analyst at CLSA. “It’s much easier for them to achieve their wealth management goals.”
Hong Kong’s benchmark Hang Seng Index has surged 30 per cent this year, doubling gains in China’s CSI 300 Index. Key drivers of the offshore market have included tech names from AI darling Alibaba Group Holding to smartphone and electric vehicle purveyor Xiaomi.
Among other big thematics, a rising tide of youthful consumerism has helped triple shares of Pop Mart International Group, the best performer on the HSI. Several others in the top 10 highlight China’s rising prominence in pharmaceuticals.
Individual investors favour sector-specific ETFs for rotation in and out of such trades, as opposed to institutional investors that are the main buyers of broad-based index trackers. Onshore funds leading the surge of inflows this year include Fullgoal CSI Hong Kong Connect Internet ETF and China Universal CNI HK Connect Innovative Drug ETF.
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“Strong momentum is driven by the Hong Kong market’s unique sectoral and thematic stories,” said Ding Wenjie, strategist for global capital investment at China Asset Management. “ETF issuers’ fast rollout of specialised products targeting niche segments of the market also significantly broadened access for Chinese retail investors looking for more differentiated exposure.”
There have been 17 new Hong Kong equity ETFs launched in China this year, with another 16 applications in the pipeline submitted to the securities watchdog.
Despite representing only 10 per cent of the total assets in China’s ETF market, Hong Kong equity funds have received more than 50 per cent of total inflows in 2025, according to Bloomberg Intelligence analysts, including Rebecca Sin and Eric Balchunas.
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“Mainland Chinese investors could increasingly shift capital into Hong Kong,” they wrote in a note. The city’s bigger returns are attractive, and given that using the cross-border trading link requires retail investors to have a minimum account balance of around US$70,000, onshore-listed ETFs are “a more convenient alternative”. BLOOMBERG
