--- title: "CITIC Securities: What Does a Stronger US Dollar Mean for Hong Kong Stocks" type: "News" locale: "zh-HK" url: "https://longbridge.com/zh-HK/news/265001742.md" description: "CITIC Securities released a research report stating that the recent strength of the US dollar is mainly due to the US government shutdown and the Federal Reserve's hawkish stance, leading to increased outflow pressure of foreign capital from Hong Kong stocks. In the short term, attention should be paid to US economic data, and it is expected that in the medium term, Hong Kong stocks will move towards new highs due to the inflow of incremental funds and the concentration of quality assets, with technology stocks becoming the main investment direction" datetime: "2025-11-09T07:54:11.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/265001742.md) - [en](https://longbridge.com/en/news/265001742.md) - [zh-HK](https://longbridge.com/zh-HK/news/265001742.md) --- > 支持的語言: [简体中文](https://longbridge.com/zh-CN/news/265001742.md) | [English](https://longbridge.com/en/news/265001742.md) # CITIC Securities: What Does a Stronger US Dollar Mean for Hong Kong Stocks According to the Zhitong Finance APP, Guotai Junan Securities has released a research report stating that the recent strengthening of the US dollar is primarily due to the "dollar shortage" caused by the US government shutdown, the hawkish stance of the Federal Reserve, and the weakness of non-US currencies. Historically, a strong US dollar puts pressure on foreign capital outflows from the Hong Kong stock market. Additionally, under the Hong Kong dollar's linked exchange rate system, this may temporarily affect local liquidity and local sectors. In the short term, attention should be paid to the reopening of the US government and economic data. In the medium term, the influx of incremental funds and the gathering of quality assets in the Hong Kong stock market are expected to reach new highs, with technology stocks being the main focus. ## The main points of Guotai Junan Securities are as follows: **What does a strong US dollar mean for the Hong Kong stock market?** Since the end of September, the US dollar index has strengthened, breaking the 100 mark on November 4, reaching its highest level since July this year. Foreign capital still occupies an important position in the Hong Kong stock market, so the movement of the US dollar has a significant impact on the liquidity of the Hong Kong stock market. Recently, under the backdrop of a strong US dollar, the performance of the Hong Kong stock market has also been relatively volatile. So how does a strong US dollar actually affect the Hong Kong stock market? What is the outlook for future trends? This article will analyze this. **Recently, influenced by the hawkish stance of the Federal Reserve and tight dollar liquidity, the US dollar index has strengthened.** In the first half of this year, the US dollar index fell sharply due to the weakening of the US economy and the global trade friction ignited by Trump. During July, the dollar rebounded, but subsequently weakened again under the dominance of interest rate cut trading. However, since the end of September, the US dollar index has fluctuated and strengthened again, currently returning to the peak level of July this year. Guotai Junan Securities believes that the main reasons behind the recent strengthening of the US dollar are threefold: First, the US government shutdown has led to tight dollar liquidity. Since the government shutdown in early October, government spending has stalled. As of October 29, the Treasury's total account balance has rapidly risen to USD 1 trillion, compared to a low of USD 300 billion in June, equivalent to withdrawing about USD 700 billion in liquidity from the market. At the same time, the Federal Reserve is still reducing its balance sheet, which further exacerbates the "dollar shortage." The spread between the overnight financing rate secured by the US and the Federal Reserve's excess reserve rate has rapidly widened to a maximum of 32 basis points, reaching a new high in 20 years, making the tightening of liquidity an important driving force for the strengthening of the US dollar. Second, hawkish statements from the Federal Reserve Chairman have cooled expectations for interest rate cuts. After the October FOMC meeting, Federal Reserve Chairman Jerome Powell stated that a rate cut in December is "far from a foregone conclusion," leading to a rapid cooling of market expectations for easing within the year. According to the FedWatch tool, the market's expectation of a rate cut in December has dropped from over 90% before the meeting to the current 61.5%. At the same time, the yield on 10-year US Treasury bonds has risen from 3.98% to 4.17%, and the rise in US bond yields has also provided upward momentum for the US dollar. Third, non-US currencies, represented by the Japanese yen, are relatively weak. The recent weakness of non-US currencies has also supported the strengthening of the US dollar: regarding the yen, the recent election of high city early rice as Japan's Prime Minister indicates that the new government is inclined towards fiscal expansion and dovish monetary policy. In October, the Bank of Japan maintained interest rates unchanged and released a wait-and-see signal, exacerbating the depreciation of the yen. Regarding the pound, due to weak wage and inflation data, the pound's exchange rate is under pressure, and the UK Chancellor of the Exchequer has indicated that tax increases and spending cuts may be introduced, further increasing economic downward pressure and pushing the pound to depreciate So what does a strong US dollar mean for Hong Kong stocks? From the perspective of the funding structure in the Hong Kong stock market, it is still dominated by foreign capital that is sensitive to changes in the US dollar. Although there has been an outflow in recent years, as of Q3 2025, foreign capital still accounts for about 60%. At the same time, local capital in Hong Kong accounts for nearly 20%, which is also susceptible to the dollar environment. The following will explore the historical and current impacts of a strong US dollar on Hong Kong stocks from the perspectives of foreign and local capital. **The attractiveness of US dollar assets increases, which may create outflow pressure on foreign capital in Hong Kong stocks.** Historically, the flow of foreign capital into Hong Kong stocks has a high correlation with the US dollar index. Among them, flexible foreign capital is more sensitive to changes in liquidity, making it more susceptible to the influence of the US dollar index. Looking back at several phases of rapid strengthening of the US dollar index since 2021, it can be observed that during the periods of 21/12-22/09 (during which flexible foreign capital had a net outflow of HKD 111.56 billion, and stable foreign capital had a net inflow of HKD 53.87 billion, the same below), 23/07-23/09 (-HKD 57.48 billion, -HKD 41.12 billion), and 24/09-25/01 (-HKD 93.72 billion, -HKD 212.46 billion), flexible foreign capital in Hong Kong stocks showed an outflow trend, while stable foreign capital, although leaning towards long-term allocation, may also be affected to some extent in a strong dollar environment. It is worth noting that the flow of foreign capital this year has also been related to the dollar environment: from May to July this year, under the backdrop of a weak dollar logic and a thawing phase of US-China negotiations, both short-term and long-term foreign capital temporarily flowed back into Hong Kong stocks, but after July, the US dollar index rebounded, and uncertainties in US-China negotiations resurfaced, leading to fluctuations in foreign capital flow. Recently, the strengthening of the US dollar index has caused some disturbances to foreign capital in Hong Kong stocks. Since the end of September, the overall net inflow of foreign capital has been -HKD 79.18 billion, among which flexible foreign capital is relatively more sensitive to the strong dollar, with a cumulative net outflow of -HKD 74.57 billion during the same period, while stable foreign capital had a cumulative net inflow of -HKD 4.61 billion. **Under the linked exchange rate system, a strong US dollar may temporarily affect local liquidity and local sectors in Hong Kong stocks.** Due to the Hong Kong Monetary Authority's implementation of a linked exchange rate system, its monetary policy goal is to maintain the Hong Kong dollar exchange rate stable within the range of 7.75 to 7.85 Hong Kong dollars per US dollar. This goal relies on two mechanisms: first, the intervention mechanism of the Monetary Authority ensures the upper and lower limits. When the Hong Kong dollar exchange rate reaches the weak side guarantee of 7.85, the Monetary Authority will passively withdraw liquidity, thereby pushing up the HIBOR rate. Conversely, liquidity is injected to lower rates; second, the market arbitrage mechanism adjusts spontaneously. Since capital in Hong Kong is freely flowing, when the interest rate differential between Hong Kong and the US widens, capital spontaneously drives interest rate/exchange rate adjustments through risk-free arbitrage behavior. Similarly, looking back at the three phases of US dollar appreciation since 2021, it can be found that a strong US dollar is often accompanied by rising US dollar interest rates, which push up the HIBOR rate under the market arbitrage mechanism. If the Hong Kong dollar exchange rate continues to depreciate to the weak side guarantee, the Monetary Authority will further increase its impact on local liquidity by withdrawing liquidity (as seen in 21/12-22/09). Historically, tightening local liquidity has also suppressed the performance of interest rate-sensitive sectors such as local consumption services and real estate Despite the strengthening of the US dollar, the HIBOR rates have not yet risen. Since August, under the backdrop of rising expectations for interest rate cuts by the Federal Reserve and rapid inflows from the south, the Hong Kong dollar exchange rate once approached the strong-side guarantee. Currently, the Hong Kong dollar exchange rate remains relatively strong, and the Monetary Authority typically only passively withdraws liquidity when the exchange rate touches the weak-side guarantee. Therefore, the short-term impact on local liquidity and local sectors may be relatively limited. **Focus on the US government reopening timeline and economic data.** In October, affected by the resurgence of US-China trade frictions, the strengthening of the US dollar index, and the previous rapid rise, the Hong Kong stock market has entered a phase of volatile adjustment. Currently, several factors suppressing the Hong Kong stock market have shown positive changes: first, the meeting between the US and Chinese leaders has released positive signals, and US-China negotiations may have returned to stability, leading to a decrease in short-term external uncertainties; second, from the perspective of adjustment time and space, the maximum decline of the Hang Seng Index since the adjustment began in October is 8.2%, and for the Hang Seng Technology Index, it is 15.8%. The adjustment has lasted for 23 trading days, exceeding the historical average of small pullbacks in bull markets; third, although the US dollar index remains strong in the short term and the pressure of foreign capital outflows has increased, this round of dollar strengthening may be more due to short-term liquidity factors. Recently, bipartisan US lawmakers have indicated that the government shutdown is expected to end before this weekend. If the US government restarts, the previously accumulated liquidity may be rapidly released, coupled with the current market's expectation of a high probability of interest rate cuts in December, the subsequent rapid rise of the US dollar index may be difficult to sustain. Attention should be paid to the timing of the US government restart and the situation of US economic data. **From a medium-term perspective, the influx of incremental funds and the gathering of quality assets in the Hong Kong stock market are expected to reach new heights.** After the adjustment in October, the valuation of the Hong Kong stock market is not high. If the short-term factors suppressing the Hong Kong stock market are resolved, the influx of incremental funds in the medium term is clear, and it has gathered high-quality, scarce assets from China, which is expected to continue supporting this round of bull market. Specifically: ① The Hong Kong stock market has a low valuation advantage. At the index level, the valuation of the Hong Kong stock market is at a global low. As of November 6, the PE ratio of the Hang Seng Technology Index is at the 30th percentile since data has been available. At the industry level, sectors such as technology in the Hong Kong stock market are more attractive in terms of valuation compared to A-shares and US stocks. The trend of the domestic AI industry has been accelerating recently, and from a valuation and profit perspective, the medium-term valuation potential of the Hong Kong stock market is significant. ② The certainty of incremental funds in the Hong Kong stock market is relatively high. In terms of foreign capital, the previously continuous outflow of foreign capital may have shown signs of stabilization since mid-year. If the Federal Reserve continues to cut interest rates and US-China trade relations continue to stabilize, the scale of foreign capital returning to the Hong Kong stock market is expected to exceed expectations. In terms of domestic capital, the pricing power of domestic capital has increased in recent years, with cumulative inflows from the south reaching nearly 1.2 trillion yuan over 25 years. Next year, southbound funds are expected to continue flowing into the Hong Kong stock market, exceeding 1.5 trillion yuan, which is expected to drive the Hong Kong stock market further upward. ③ The assets in the Hong Kong stock market have scarcity. China is at an important juncture of transformation between old and new driving forces. Against the backdrop of slowing domestic macroeconomic growth, domestic capital is facing pressure from asset scarcity. Although there is a lack of upward elasticity at the macro level, profound changes are occurring at the industrial level. For example, the new upward cycle led by AI in China continues to deepen. Therefore, scarce assets in the Hong Kong stock market, such as AI applications that align more with the current industrial development trends, may have greater advantages **Structurally, under the drive of AI, Hong Kong stock technology remains the main line of the market.** The overseas narrative of "AI empowerment" is expected to gradually reflect in the domestic market. The stabilization of Sino-U.S. relations will help enhance the risk appetite of the Hong Kong stock market, and the disturbances to profit expectations caused by the "subsidy war" among internet takeaway platforms may gradually fade. The leading technology stocks in Hong Kong have a certain first-mover advantage in this wave of AI and will fully benefit from the dividends of the AI industrial transformation. As the upward trend of the AI industry cycle is further confirmed, leading technology stocks in Hong Kong are expected to regain relative advantages. In addition, pay attention to innovative drugs that are accelerating overseas expansion and achieving performance. In recent years, the overseas expansion of innovative drugs in China has accelerated. Looking ahead, the market for innovative drugs in Hong Kong is expected to shift from an overseas narrative to a fundamentals-driven approach, coupled with the expectation of loose overseas liquidity to open up upward space. Moreover, under a bull market environment, the brokerage sector in Hong Kong is also worth noting. **Risk Warning:** The implementation progress of stable growth policies is less than expected, the international trade environment deteriorates beyond expectations, and the pace of Federal Reserve interest rate cuts is slower than anticipated ### 相關股票 - [Huatai-PB CSOP Hang Seng Technology ETF(QDII) (513130.CN)](https://longbridge.com/zh-HK/quote/513130.CN.md) - [Hang Seng TECH Index (STECH.HK)](https://longbridge.com/zh-HK/quote/STECH.HK.md) ## 相關資訊與研究 - [BOK gov nominee Shin: Korean won liquidity is good](https://longbridge.com/zh-HK/news/281097264.md) - [GLOBAL MARKETS-Oil heads toward record monthly gain, equities mixed](https://longbridge.com/zh-HK/news/281074287.md) - [Bok Gov Nominee Shin: The Current Level of Korean Won Is Not That Meaningful](https://longbridge.com/zh-HK/news/281094929.md) - [There's A Lot To Like About Takebishi's (TSE:7510) Upcoming JP¥39.00 Dividend](https://longbridge.com/zh-HK/news/280571838.md) - [FUJIFILM Holdings Corporation announces an Equity Buyback for 13,000,000 shares, representing 1.08% for ¥30,000 million.](https://longbridge.com/zh-HK/news/281042703.md)