HSBC Research expresses confidence in long-term capital inflows into southbound stocks, optimistic about HKEX and BOC HONG KONG

HSBC Research published a report indicating that with the recent historical highs in the outflow and inflow of southbound funds, investors have increased concerns regarding the fund flows of the Hong Kong Stock Connect. However, the bank believes that southbound stocks have a stabilizing effect; despite significant short-term volatility, it is confident about long-term capital inflows.

Among Hong Kong financial stocks, the bank is more optimistic about Hong Kong Exchanges and Clearing (00388.HK) and BOC HONG KONG (02388.HK) compared to AIA Group (01299.HK), as Hong Kong Exchanges and Clearing benefits from increased market activity, while BOC HONG KONG is more suitable for long-term southbound income-oriented investors; the expectation of interest rate cuts may support its net interest margin. As for AIA Group, its distribution in Hong Kong mainly targets investment-linked policies, and growth expectations remain high.

Regarding Chinese financial stocks, the bank prefers bank stocks over insurance stocks in the short term, as bank stocks have a good historical record in terms of profitability and dividend stability, and their core business has a lower correlation with the stock market. The bank is more inclined towards large state-owned bank stocks, such as ICBC (01398.HK) and CCB (00939.HK)