New Trends in Hong Kong Connect Funds: Southbound Flow Accelerates in Early October 2026, Low-valuation Sectors Become Favorites

In early October 2026, the Hong Kong stock market maintained the active momentum from the end of September, with funds through the Stock Connect program (northbound flows) continuously flowing southward, showing an accelerated deployment trend. According to the latest data, in the first three trading days of early October, the cumulative net inflow through Stock Connect exceeded HK$20 billion, with a single-day net inflow of HK$8.5 billion on October 9th, reaching a recent high. This capital movement indicates that mainland investors' confidence in the Hong Kong stock market is gradually recovering, and low-valuation sectors have become new favorites for capital deployment. Accelerated Deployment of Northbound Flows Brings Incremental Capital to Hong Kong Market Since the beginning of October, funds through the Stock Connect program have shown a clear acceleration in inflows. According to Wind data statistics, from October 1 to October 9, the cumulative net inflow through Stock Connect reached HK$21.86 billion, an increase of about 35% compared to the same period in September. Among these, the single-day net inflow on October 9 was HK$8.52 billion, the highest single-day figure in nearly three months. This change in capital flow reflects mainland investors' renewed recognition of the valuation advantages in the Hong Kong stock market. Among major global markets, Hong Kong valuations remain at relatively low levels, especially compared to A-shares, where many Hong Kong-listed stocks have significant discount advantages. As the opening-up of mainland capital markets continues to increase, Stock Connect, as an important channel connecting the two markets, has attracted more and more mainland capital to deploy southward. Capital Deployment Shifts to Low-Valuation Sectors Looking at specific sectors for capital flow, northbound flows in early October clearly favored low-valuation sectors. Data shows that traditional low-valuation sectors such as finance, energy, and utilities received large net inflows. Among these, the banking sector had a net inflow of over HK$4 billion, the energy sector had approximately HK$3.5 billion, and the utilities sector had about HK$2.8 billion. This change in capital deployment is closely related to the market environment. On one hand, the global economy faces increasing uncertainty, investors' risk appetite is declining, and there's a greater tendency to allocate to defensive assets. On the other hand, the interest rate differential between Hong Kong and the mainland remains at relatively high levels, making high-dividend assets particularly attractive to mainland investors. Why Have Low-Valuation Sectors Become New Favorites for Capital? Low-valuation sectors gained favor with northbound capital in early October mainly for the following reasons: Clear Valuation Advantages: Compared to other major global markets, Hong Kong's low-valuation sectors still have significant valuation advantages. Taking banks as an example, Hong Kong-listed bank stocks have an average price-to-book ratio of about 0.6 times, while A-share bank stocks have an average of about 0.8 times, showing clear discount potential. High Dividend Yields: In the current interest rate environment, high-dividend assets are particularly attractive to investors. Hong Kong's low-valuation sectors generally have high dividend yields, with some bank stocks having dividend yields exceeding 5% and energy stocks also having yields above 4%. Prominent Defensive Characteristics: Against the backdrop of downward pressure on the global economy, low-valuation sectors typically have strong defensive characteristics that can provide stable returns to investment portfolios. Increased Policy Support: Recently, both mainland China and Hong Kong have introduced a series of policy measures to support the development of traditional