<h2>Key Points</h2>
1. Short-term changes in the capital market: short cover provides momentum, short selling transaction ratio declines
<ul>
<li>The report on September 3rd, &#34;The Long Bull of Hong Kong Stocks: 'Autumn Triumphs Over Spring'&#34;, firmly optimistic about Hong Kong stocks, indicating that there is sufficient upward momentum in the short term, and a slow bull market is expected to continue with fluctuations upward. It is especially recommended to prioritize high cost-performance internet stocks. We have continuously pointed out that August was a good time to position in internet stocks at low prices, and we maintain that in the medium term, the narrative of Hong Kong's internet market is expected to shift from &#34;takeout internal competition&#34; back to AI empowerment narrative and technology growth narrative, with future performance recovery expected to have upward elasticity. In the short term, short selling in the internet sector is overly crowded, while valuations are at historically low percentiles, making it a good time to position at low prices.</li>
<li>Previously, affected by the internal competition of the takeout war among internet giants, the short selling transaction ratio of Hong Kong stocks rose to a historical high of 20.8% in August. The number of outstanding short positions in leading internet stocks was also at a historical high in the past five years in mid-August.</li>
<li>Since early September, with the continuous efforts in AI business, the performance of some leading internet companies has improved, and the negative factors that previously suppressed the sector have gradually diminished, leading to short covering and a decline in the short selling transaction ratio. As of September 12, 2025, the short selling transaction ratio of the Hang Seng Index was 13.8%, at the 64.2% percentile level since 2021, significantly down from the 20.8% in mid-August 2025.</li>
</ul>
2. Medium-term changes in the capital market: foreign capital outflow slows, some sectors welcome inflow first
(1) Since March 2022, foreign capital has continued to flow out of Hong Kong stocks, but since May 2025, the trend of foreign capital outflow has shown marginal improvement
Since March 2022, foreign capital has continuously flowed out of Hong Kong stocks; however, this trend has shown significant marginal improvement since May 2025. Since April 2025, the weakening of the US dollar and the emergence of fundamental highlights in Hong Kong stocks have significantly slowed the pace of foreign capital outflow.
<ul>
<li>From January to April 2024, the cumulative net outflow of foreign capital from Hong Kong stocks reached 495.94 billion yuan; from May to August 2025, the cumulative net outflow of foreign capital from Hong Kong stocks decreased to 259.39 billion yuan, with the outflow scale significantly reduced compared to before. In June, the outflow was mainly due to the internal competition in the takeout business of internet giants, while in May and July, Hong Kong stocks achieved net foreign capital inflows in single months, with net inflow amounts of 76.55 billion yuan and 40.03 billion yuan, respectively.</li>
</ul>
(2) Which industries are the first to attract foreign capital?
<ul>
<li>Since May 2025, the information technology and industrial sectors have been the main industries for net inflow of foreign capital, achieving net inflows of 43.8 billion yuan and 41.7 billion yuan, respectively, significantly higher than other industries; the materials and healthcare sectors have also received positive foreign capital allocation, achieving net inflows of 6.6 billion yuan and 6.57 billion yuan since May, respectively
(3) What are the most favored stocks by foreign capital since May?</li>
</ul>
From the list of the top twenty stocks with net inflows of foreign capital since May, it can be seen that high-quality newly listed companies in Hong Kong and industry leaders are the two types of companies that attract foreign capital the most.
<ul>
<li>Since 2024, many high-quality enterprises have been listed in Hong Kong, attracting foreign capital allocation. Among them, Ningde Times, which was listed in May 2025, has performed the most outstandingly, attracting a cumulative net inflow of foreign capital of 33.17 billion yuan since May. Other newly listed stocks favored by foreign capital include Heng Rui Medicine (9.23 billion yuan), Hai Tian Wei Ye (8.59 billion yuan), Sanhua Intelligent Control (7.17 billion yuan), Horizon Robotics (4.82 billion yuan), and DuoDian Smart (3.63 billion yuan).</li>
<li>Industry leaders are also a core choice for foreign capital allocation. Such targets include Tencent Holdings (26.92 billion yuan) and Xiaomi Group (19.39 billion yuan) in the information technology sector, as well as Yuan Da Medicine (17.54 billion yuan) and WuXi Biologics (7.09 billion yuan) in the healthcare sector, and Pop Mart (5.09 billion yuan) in non-essential consumer goods.</li>
</ul>
Note: The amounts in parentheses represent the net inflow of foreign capital since May.
<h2>Report Body</h2>
<ol>
<li>Short-term changes in capital: short cover provides momentum, short selling transaction ratio declines</li>
</ol>
The report on September 3, &#34;The Long Bull of Hong Kong Stocks: 'Autumn Triumphs Over Spring'&#34;, firmly holds a positive outlook on Hong Kong stocks. The short-term upward momentum of Hong Kong stocks is strong, and a slow bull market is expected to continue with fluctuations upward. It is especially recommended to prioritize high cost-performance internet stocks. We continue to emphasize that August was a good time to position in the internet sector at low prices, and we maintain that in the medium term, the internet market in Hong Kong is expected to shift from the narrative of &#34;takeout competition&#34; back to the narratives of AI empowerment and technological growth, with future performance recovery expected to have upward elasticity. The short selling trades in the internet sector have become excessively crowded in the short term, while valuations are at historically low percentiles, making it a good time to position at low prices.
Previously, influenced by the competition among internet giants in the takeout battle, the proportion of short selling transactions in Hong Kong stocks rose to a historical high of 20.8% in August. By mid-August, the number of outstanding short positions in leading internet stocks was also at a historical high over the past five years.
<ul>
<li>
As of August 15, 2025, the outstanding short positions for Tencent, Alibaba, Meituan, JD Group, and Baidu Group were at the 44.5%, 94.9%, 100.0%, 66.4%, and 100.0% percentile levels, respectively. (Note: The historical percentile time range for Baidu starts from March 26, 2021.)
</li>
<li>
Since early September, with the continuous efforts in AI business, the performance of some leading internet companies has improved, and the negative factors that previously suppressed the sector have gradually diminished, leading to short covering and a decrease in the proportion of short selling transactions. As of September 12, 2025, the proportion of short selling transactions in the Hang Seng Index was 13.8%, at the 64.2% percentile level since 2021, significantly down from 20.8% in mid-August 2025
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/da9af1a8-64e0-412b-acff-7cf3340ddee3.jpeg?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://wpimg-wscn.awtmt.com/da9af1a8-64e0-412b-acff-7cf3340ddee3.jpeg"/>
</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5f65fb2a-d74a-4138-ab71-b4293cc4797c.jpeg?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://wpimg-wscn.awtmt.com/5f65fb2a-d74a-4138-ab71-b4293cc4797c.jpeg"/>
II. Mid-term changes in the capital market: Slowing outflow of foreign capital, with some sectors experiencing a return
(1) Since March 2022, foreign capital has continuously flowed out of Hong Kong stocks, but since May 2025, the trend of foreign capital outflow from Hong Kong stocks has shown marginal improvement.
Since March 2022, foreign capital has continuously flowed out of Hong Kong stocks, but this trend has shown significant marginal improvement since May 2025. Since April 2025, the weakening of the US dollar and the emergence of fundamental highlights in Hong Kong stocks have significantly slowed the pace of foreign capital outflow from Hong Kong stocks.
<ul>
<li>The magnitude of foreign capital withdrawal from Hong Kong stocks has narrowed marginally since May 2025: From January to April 2024, the cumulative net outflow of foreign capital from Hong Kong stocks reached 495.94 billion yuan; from May to August 2025, the cumulative net outflow of foreign capital from Hong Kong stocks decreased to 259.39 billion yuan, significantly reduced compared to before. In June, the outflow was mainly due to the capital outflow from related stocks caused by the competition in the takeaway business of internet giants, while in May and July, Hong Kong stocks achieved net foreign capital inflows in a single month, with net inflow amounts of 76.55 billion yuan and 40.03 billion yuan, respectively.</li>
</ul>
(Note: Cumulative net inflow is based on a capital base of 0 on the starting date, and then daily net purchase amounts are added day by day.)
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ecc6034f-5d29-4710-bd09-4c319a457e03.jpeg?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://wpimg-wscn.awtmt.com/ecc6034f-5d29-4710-bd09-4c319a457e03.jpeg"/>
(2) Which industries are the first to attract foreign capital?
Since May 2025, the information technology and industrial sectors have been the main industries for net inflows of foreign capital, achieving net inflows of 43.8 billion yuan and 41.7 billion yuan, respectively, significantly higher than other industries; the materials and healthcare sectors have also received positive foreign capital allocations, achieving net inflows of 6.6 billion yuan and 6.57 billion yuan since May.
<ul>
<li>
Information Technology: The information technology sector is one of the first industries to experience a turnaround since 2025, attracting a net inflow of foreign capital of 28.48 billion yuan in February 2025. In the following months of May and July, the intensity of foreign capital inflow further increased, achieving net inflows of 45.75 billion yuan and 21.23 billion yuan, respectively.
</li>
<li>
Industrial: In May 2025, the listing of CATL on the Hong Kong stock market directly drove a significant influx of foreign capital into the industrial sector, with a single-month net inflow of 32.63 billion yuan, setting a record for the largest single-month net inflow since March 2022. Subsequently, foreign capital's allocation to the industrial sector has remained consistent, achieving net inflows from June to August of 1.70 billion yuan, 5.93 billion yuan, and 2.07 billion yuan, respectively
</li>
<li>
Raw Materials Industry: From May to August 2025, the raw materials industry continued to attract net inflows of foreign capital, with monthly net inflows of RMB 1.06 billion, RMB 670 million, RMB 3.57 billion, and RMB 4.27 billion respectively. In terms of direction, since May, foreign capital has mainly focused on leading companies in the industry, with companies such as WanGuo Gold Group and China Hongqiao becoming key targets for foreign investment.
</li>
<li>
Healthcare Industry: Since October 2024, the healthcare industry has been experiencing significant net outflows of foreign capital, but this trend reversed starting in May 2025, achieving a net inflow of RMB 9.20 billion in May. Although there was another significant net outflow of foreign capital in June (with a net inflow of RMB 21.05 billion in June), it quickly rebounded in July with a substantial net inflow of RMB 12.51 billion, setting a record for the largest monthly net inflow since March 2022.
</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/fdb8d24f-985f-41e2-997f-e1868a5de4fc.jpeg?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://wpimg-wscn.awtmt.com/fdb8d24f-985f-41e2-997f-e1868a5de4fc.jpeg"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/189c277a-a223-46d4-b0b0-e7630b686024.jpeg?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://wpimg-wscn.awtmt.com/189c277a-a223-46d4-b0b0-e7630b686024.jpeg"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/22753a2b-70cf-4afe-93c6-ea655b9d6999.jpeg?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://wpimg-wscn.awtmt.com/22753a2b-70cf-4afe-93c6-ea655b9d6999.jpeg"/>
(3) Which stocks have been most favored by foreign capital since May?
From the list of the top twenty stocks with net inflows of foreign capital since May, it can be seen that high-quality newly listed stocks in Hong Kong and industry leaders are the two types of companies that attract the most foreign capital inflows.
<ul>
<li>
Since 2024, many high-quality companies have been listed in Hong Kong, attracting foreign capital allocation. Among them, Ningde Times, which was listed in May 2025, has performed the most outstandingly, attracting a cumulative net inflow of RMB 33.17 billion since May. Other newly listed stocks favored by foreign capital include Heng Rui Medicine (RMB 9.23 billion), Haitian Flavoring and Food (RMB 8.59 billion), Sanhua Intelligent Control (RMB 7.17 billion), Horizon Robotics (RMB 4.82 billion), and Duodian Smart (RMB 3.63 billion).
</li>
<li>
Industry leaders are also a core choice for foreign capital allocation. Specifically, in the information technology sector, Tencent Holdings (RMB 26.92 billion) and Xiaomi Group (RMB 19.39 billion); in the healthcare sector, Yuan Da Medicine (RMB 17.54 billion), WuXi Biologics (RMB 7.09 billion), Crystal Technology Holdings (RMB 3.42 billion), and JD Health (RMB 2.85 billion); in the non-essential consumer sector, Pop Mart (RMB 5.09 billion), Anta Sports (RMB 4.99 billion), Sands China Ltd. (RMB 3.08 billion); and in the raw materials sector, WanGuo Gold Group (RMB 2.77 billion) have all received significant net inflows of foreign capital
Note: The amount of net inflow of foreign capital since May is in parentheses.
</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/cb93277f-f8ad-4d57-8b55-e5518693bd6b.jpeg?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://wpimg-wscn.awtmt.com/cb93277f-f8ad-4d57-8b55-e5518693bd6b.jpeg"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/6c3a173c-0eb8-4ae6-b7a8-5ef1f742fed2.jpeg?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://wpimg-wscn.awtmt.com/6c3a173c-0eb8-4ae6-b7a8-5ef1f742fed2.jpeg"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4d6d4468-0990-48e1-9c81-f3d88929c6e6.jpeg?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://wpimg-wscn.awtmt.com/4d6d4468-0990-48e1-9c81-f3d88929c6e6.jpeg"/>
Author of this article: Zhang Yidong, Source: Zhang Yidong Strategy World, Original title: &#34;【Xingzheng Zhang Yidong (Global Strategy) Team】Two Major Changes in Hong Kong Stock Market Capital&#34;
Risk Warning and Disclaimer
The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk

Recently, there have been two major changes in the Hong Kong stock market's capital situation: in the short term, the proportion of short selling transactions decreased from 20.8% in August to 13.8% in September, indicating a trend of short covering and an increased positive sentiment towards the internet sector; in the medium term, foreign capital has been continuously flowing out of Hong Kong stocks since March 2022, but the outflow trend has improved since May 2025, with the scale of foreign capital outflow significantly reduced, and some sectors have begun to see a return of funds

Two Major Changes in the Hong Kong Stock Market's Capital Situation