This week's notable changes in the funding situation are: 1) EPFR data shows that as of this Wednesday (February 19), active foreign capital continued to flow out of the Chinese market overall, but the outflow scale has narrowed; meanwhile, passive foreign capital has accelerated inflow; 2) In terms of connectivity, the average daily trading volume of northbound funds increased compared to last week, and southbound funds accelerated significantly, with a single-day inflow on Tuesday reaching a new high since January 2021; 3) Global stocks have turned to inflow, while bonds and money markets continue to see inflows; 4) U.S. stocks have turned to inflow, while emerging markets' outflow has slowed.
In the domestic funding situation, southbound funds are accelerating inflow. This week, southbound funds saw a significant inflow of HKD 51.21 billion, more than double the inflow of HKD 21.77 billion last week. The previous week, southbound funds had a brief outflow, possibly related to some investors who bought in early October realizing profits. On this basis, driven by the continued rise in the market this week, especially the boost from Alibaba's earnings report on Friday, southbound funds accelerated inflow, with a significant inflow of HKD 22.42 billion on Tuesday alone, reaching a new high since January 2021. The outflow again on Thursday indicated an increase in divergence, but on Friday, boosted by Alibaba, southbound funds flowed back in with HKD 14.04 billion.
Chart: Southbound funds accelerate inflow
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvIAzONUGT3BBKicQiaWJe8xEBK6guokxn4KVGJd940oLegukpWLqLmXmA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvIAzONUGT3BBKicQiaWJe8xEBK6guokxn4KVGJd940oLegukpWLqLmXmA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: EPFR, Wind, CICC Research Department; Data as of February 19, 2025
Overall, the proportion of southbound trading in the total trading volume of Hong Kong stocks has maintained at around 30% since it increased from 20% last November. This week, the proportion of southbound trading slightly increased by 2.3 percentage points to 31%, while the market value of southbound holdings accounted for about 10% of the total market value of Hong Kong stocks, without a significant increase. At the individual stock level, this week, southbound funds were concentrated in buying, with significant inflows into Alibaba, China Mobile, SMIC, Kuaishou, etc., while outflows were seen from Meituan, Tencent Holdings, etc. Among them, Alibaba saw a significant inflow of HKD 17.3 billion this week, accounting for one-third of the total net inflow of southbound funds for the week. The proportion of southbound holdings in Alibaba also increased from 5.2% last Friday to 5.8%, a rise of 0.6 percentage points.
Chart: The proportion of southbound funds in the Hong Kong Stock Exchange main board trading is about 30%
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvlQSjyicfibiccIyMYcfgA8bf3QxiaYkPIHc6ENicg7x4vPSuqTXMzSmBtnw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvlQSjyicfibiccIyMYcfgA8bf3QxiaYkPIHc6ENicg7x4vPSuqTXMzSmBtnw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: Wind, CICC Research Department
Chart: Southbound capital's shareholding value accounts for 10% of the total market value of Hong Kong's main board
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvdkbicvtI7Wbyn5tsg1oOPDZ2vbOYZJY2w0b8BAK1YicrUBDRSsPegndA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvdkbicvtI7Wbyn5tsg1oOPDZ2vbOYZJY2w0b8BAK1YicrUBDRSsPegndA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: Wind, CICC Research Department
Chart: The proportion of holdings in the top ten active stocks this week has increased
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvtp34HjQhricsDehx1TDOKCjQ7ibU6tOFOcuH5PHGRMaM3wTRYSUT5VZw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvtp34HjQhricsDehx1TDOKCjQ7ibU6tOFOcuH5PHGRMaM3wTRYSUT5VZw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: Wind, CICC Research Department
Foreign capital basically continues the previous trend, with active foreign capital continuing to flow out but at a reduced scale, while passive foreign capital accelerates inflow. As of this Wednesday (February 19), in the Hong Kong stock market: 1) Passive funds (ETFs) accelerated inflow, with the inflow scale of passive foreign capital into Hong Kong stocks and ADR rising from last week's USD 540 million to USD 910 million, mainly focused on funds investing in China and Chinese concept stocks, consistent with investors using these two index tools to speculate on the technology market; 2) The outflow of active funds (mainly long-only) has narrowed, with outflows mainly from funds focused on China and emerging markets, while inflows are mainly from Chinese concept funds. Therefore, although some trading desks report that some long-term funds have turned to inflow, according to EPFR statistics, the total active foreign capital has not yet returned; 3) The short-selling ratio dropped significantly from Tuesday's high of 19% to Friday's 13.7%, which may indicate a short squeeze and hedge fund liquidation behavior. In comparison, the passive foreign capital inflow into A-shares remained the same as last week, at only USD 430 million, while active foreign capital accelerated outflow.
Chart: Active foreign capital outflow from A-shares expands
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvGjG2plbpo9QMDLwpz0Q384wvyImL8qicMRzgsuibsIzDgCwvBuKWRXmw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvGjG2plbpo9QMDLwpz0Q384wvyImL8qicMRzgsuibsIzDgCwvBuKWRXmw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: EPFR, Wind, CICC Research Department
Chart: Active foreign capital outflow from Hong Kong stocks + ADR continues
![](https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdv9GJkDbkxC3QiaOfDe6tJKtxEEX5Dk5uTuXJjYF13CsrwfmKlQ9rjEsg/640?
Data Source: EPFR, Wind, CICC Research Department
Chart: The short interest ratio dropped significantly from a high of 19% on Tuesday to 13.9% on Friday.
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdv5LAshib8QQl5ZbiaWxwVoV1wUaKPPRX6voZLyaWTBvicXYbIa3uthYXMA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdv5LAshib8QQl5ZbiaWxwVoV1wUaKPPRX6voZLyaWTBvicXYbIa3uthYXMA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Data Source: Bloomberg, CICC Research Department
How much allocation space do foreign investors have? As of December 2024, the proportion of Chinese stocks held by major global active funds that can invest in Chinese stocks is 6.1% of their asset size, which is 1.1 percentage points lower than the corresponding benchmark index (i.e., underweight level). This proportion remains at a historical low and is far below the peak of 14.6% at the beginning of 2021. Assuming that foreign investors gradually turn optimistic and are willing to increase their allocation, we estimate: 1) Scenario One: Since active funds targeting global and Asian markets (excluding Japan) are overweight in Asian countries like South Korea and India, if subsequent active foreign allocations to these two markets drop to near five-year lows, funds will rebalance to China, corresponding to an inflow of $6.3 billion, close to the outflow scale since October 2024 (which is $8.8 billion); 2) Scenario Two: If the current underweight of 1.1 percentage points is fully converted to benchmark weight (as of the end of 2021), it corresponds to an inflow of $40.3 billion, equivalent to the total outflow from the Chinese market since 2021 under EPFR's criteria (approximately $41.9 billion). However, it should be noted that the return of active foreign capital requires the AI industry trend and macro narrative to be further realized to provide more catalysts.
Chart: The current allocation ratio of active funds to China is about 1.1 percentage points lower than the benchmark.
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_jpg/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvQoibhiauD90ytNX8BVEFmKHIlrwicc2CPbGNu15QUy3m4umLEia68evp6w/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PWpwZWc?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_jpg/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvQoibhiauD90ytNX8BVEFmKHIlrwicc2CPbGNu15QUy3m4umLEia68evp6w/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PWpwZWc"/>
Data Source: EPFR, CICC Research Department
Additionally, it is worth noting that on February 21, the Hang Seng Index series announced quarterly adjustment results. Due to the maximum weight limit of individual stocks in the Hang Seng Index and the Hang Seng Tech Index not exceeding 8%, stocks that have recently risen significantly and exceed 8% in weight (such as Alibaba, Tencent, HSBC, Xiaomi, SMIC, etc.) will lead to passive funds &#34;reducing&#34; their weight on the adjustment execution date (March 7)
Global liquidity: US stocks have turned to inflows, while Japanese and Indian stocks are accelerating outflows. As of this Wednesday (February 13 - February 19), the outflow of active foreign capital from the Indian market slightly expanded to USD 510 million (vs. USD 430 million outflow last week), US stocks shifted from an outflow of USD 40.87 million the previous week to an inflow of USD 1.45 billion, and the Japanese stock market accelerated its outflow to USD 138 million (vs. USD 72.61 million outflow last week).
<h2>Active foreign capital continues to flow out, while passive inflows accelerate; southbound inflows speed up</h2>
Overseas funds: EPFR shows that active foreign capital continues to flow out but at a reduced scale, while passive inflows accelerate. As of this Wednesday (February 13 - February 19), active foreign capital outflow from A-shares accelerated to USD 130 million (vs. USD 80 million outflow last week), while passive funds inflow was USD 430 million (vs. USD 430 million inflow last week); at the same time, the overall inflow of overseas funds into Hong Kong stocks and ADRs expanded to USD 680 million (vs. USD 280 million overall inflow last week), with active funds slowing their outflow from USD 260 million last week to USD 230 million, while passive funds inflow significantly accelerated, nearly doubling from USD 540 million last week to USD 910 million.
Chart: This week, active foreign capital continues to flow out of the A-share market, but passive foreign capital flows in significantly.
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvkFfGfdh6qx3TFKFBiaubdIIjibib4Rc5TicPOGO42UTD07o2lxX2OWWQyA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvkFfGfdh6qx3TFKFBiaubdIIjibib4Rc5TicPOGO42UTD07o2lxX2OWWQyA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: EPFR, CICC Research Department
Connect funds: Northbound funds will stop disclosing net buying amounts starting August 16, 2024, with this week's average daily trading volume increasing compared to last week. This week, the trading amount of northbound funds was approximately CNY 218.16 billion, a slight increase from last week's average daily trading amount of CNY 201.56 billion. In terms of individual stocks, BYD, CATL, Northern Huachuang, and Kweichow Moutai had the largest trading volumes.
Chart: Weekly average trading amount of northbound funds
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvmaAianTAJ8Vx8N0vL6icquqJcz0icbx2t0XQUjEgInDmo1ZRkGiciagQkdA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvmaAianTAJ8Vx8N0vL6icquqJcz0icbx2t0XQUjEgInDmo1ZRkGiciagQkdA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: Wind, CICC Research Department
Significant acceleration of southbound inflows. This week, southbound capital inflows amounted to HKD 51.21 billion, with an average daily inflow of HKD 10.24 billion, doubling from the previous week's average daily inflow of HKD 4.35 billion. On Tuesday, the southbound inflow reached HKD 22.42 billion in a single day, setting a new high since January 2021, but on Thursday, it briefly turned into a net outflow. At the individual stock level, there was a significant inflow into Alibaba and China Mobile this week, while Meituan and Tencent Holdings experienced outflows. At the industry level, this week saw the largest increase in southbound holdings in consumer and mainland banks, while reducing holdings in energy, materials, and automobiles.
Chart: Changes in southbound capital holdings this week
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvnRXJhnaThWE2IuOMGOgzOlkJc01xSMTL3sXKP3JQnEyk1ZyoUfMsvA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvnRXJhnaThWE2IuOMGOgzOlkJc01xSMTL3sXKP3JQnEyk1ZyoUfMsvA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: Wind, CICC Research Department
<h2>Global stocks turn to inflows, bonds and money markets continue to see inflows; US stocks turn to inflows, emerging markets outflows slow</h2>
Cross-market and asset: US stocks turned to inflows, while developed Europe, Japan, and emerging markets continued to see outflows. In terms of active foreign capital, US stocks saw an inflow of USD 1.454 billion this week (vs. outflow of USD 0.041 billion last week), developed Europe accelerated outflows of USD 1.319 billion (vs. outflow of USD 1.022 billion last week), Japan's stock market accelerated outflows of USD 0.138 billion (vs. outflow of USD 0.073 billion last week), and emerging markets saw outflows slow to USD 1.305 billion (vs. outflow of USD 1.355 billion last week). In terms of cross-assets, global stocks turned to inflows, while bonds and money markets continued to see inflows.
Chart: Weekly net subscriptions of global stocks, bonds, and money market funds
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvoarbHicgUrEJp0dpTQ2HttBgoHRyaWTmJQzjBibEhHVeGZbV6qPFehMg/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/mmbiz_png/9DtYPOycyt4Ua8tibMvASyNQfNiaeuDmdvoarbHicgUrEJp0dpTQ2HttBgoHRyaWTmJQzjBibEhHVeGZbV6qPFehMg/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: EPFR, CICC Research Department
Allocation ratio: As of December 31, 2024, the allocation ratio of various major types of active funds to China is approximately 1.1 percentage points below the benchmark, which is basically flat compared to the under-allocation of 1.2 percentage points at the end of November. In terms of allocation ratio, active funds with a global investment direction have increased their allocation to France (+0.23 percentage points) and Japan (+0.09 percentage points) significantly, while reducing allocation to the United States (-0.49 percentage points) and the United Kingdom (-0.10 percentage points); in terms of ultra-low allocation ratios, France (+0.17 percentage points), Australia (+0.06 percentage points), and Germany (+0.04 percentage points) have seen significant increases, while the United States (-0.44 percentage points), the United Kingdom (-0.08 percentage points), and South Korea (-0.07 percentage points) have seen declines
The proportion of ultra-low configurations has declined significantly. In terms of regional types, funds managed by managers from Europe are the main outflow force; at the sector level, overseas funds are overweight in China's healthcare, consumer, semiconductors and hardware, and capital goods, while underweight in internet, finance, and real estate.
Chart: The allocation ratio of active funds to China and India has declined, while Japan's underweight ratio has decreased.
<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_png/ShbYhKZw7ia9KyE8ibtBPJsAIWdC7TUP2Q86ceGRXUvCiaOjDyV6wHq1CuksUSP8cIXGTra5znHen23MibnwWGbssA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_png/ShbYhKZw7ia9KyE8ibtBPJsAIWdC7TUP2Q86ceGRXUvCiaOjDyV6wHq1CuksUSP8cIXGTra5znHen23MibnwWGbssA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>
Source: EPFR, CICC Research Department
Analyst Liu Gang CFA SAC Practicing Certificate No.: S0080512030003 SFC CE Ref: AVH867
Contact Wang Muyao SAC Practicing Certificate No.: S0080123060036
Analyst Wu Wei SAC Practicing Certificate No.: S0080524070001
Analyst Zhang Weihuan SAC Practicing Certificate No.: S0080524010002 SFC CE Ref: BSV497
Risk Warning and Disclaimer
The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk

Alibaba  earnings 

BABA

09988

07552

07226

03690

01810

This week, southbound capital inflows into Hong Kong stocks significantly accelerated, reaching HKD 51.21 billion, which is double that of last week. Despite continued outflows of active foreign capital, passive foreign capital has accelerated its inflow, and the average daily trading volume of northbound capital has also increased. Alibaba's financial report boosted the market, with southbound capital hitting a new high since January 2021 on Tuesday. Overall, the proportion of southbound trading in the total trading volume of the Hong Kong stock main board remains around 30%, mainly concentrated in individual stocks such as Alibaba

- This week, foreign capital trends show a continued outflow of active foreign investment from China, though at a reduced scale, while passive foreign investment accelerates.  
- Notably, southbound capital saw a significant inflow of 512.1 billion HKD, doubling from the previous week, with Alibaba receiving substantial investment.  
- Globally, stock markets shifted to inflows, particularly in the U.S., while emerging markets experienced a slowdown in outflows.

Wallstreetcn

Alibaba

BABA-W

XI2CSOPHSTECH

XL2CSOPHSTECH

MEITUAN

XIAOMI-W

CICC

Hang Seng TECH Index

KUAISHOU-W

TENCENT

HSBC HOLDINGS

BYD COMPANY

CSOP HS TECH

HSTECH ETF

SMIC

CATL

NAURA

Hang Seng Index

Huatai-PB CSOP Hang Seng Technology ETF(QDII)

CHINA MOBILE

Semiconductor

Moutai

Who is buying Hong Kong stocks? CICC: Southbound inflows have doubled, passive foreign capital is accelerating inflows, and active foreign capital has not yet returned