Hong Kong stocks fall 5.36% in October as mainland investors withdraw HK$28 billion

Hong Kong stocks ended October with a rally on Friday, but it did little to repair the month. Mainland Chinese investors pulled about HK$28 billion out of the market in October, their largest monthly net withdrawal since 2021, according to an IBTimes tally of daily Stock Connect data through the 30 October close.

The Hang Seng Index rose 335.77 points, or 1.46%, to 23,294.42 on Friday, on turnover of HK$214.3 billion. It still finished the month down 5.36% from its 30 September close of 24,613.27. The Hang Seng Tech Index, home to Tencent, Alibaba and Xiaomi, edged up 0.29% to 3,754.90 on the day. It lost 11.73% over October.

The selling did not let up. Southbound investors, who buy Hong Kong shares through the Stock Connect links with Shanghai and Shenzhen, were net sellers for 13 straight sessions from 13 October. Over that run they offloaded a combined HK$37.3 billion, which wiped out the HK$9.4 billion of net buying in the three sessions after the channel reopened from the Golden Week holiday on 8 October. Even as the index climbed on Friday, they sold a net HK$3.56 billion.

The swing from September is stark. That month, mainland investors put a net HK$60.8 billion into Hong Kong stocks, their fourth straight month of buying, the South China Morning Post reported, citing Wind data. Since 2021 there have been only two monthly net outflows: about HK$5.85 billion in June 2023 and HK$3.55 billion in May this year. October's is nearly eight times the size of May's.

Friday's flows showed which stocks the money was leaving. Southbound accounts sold a net HK$999 million of SMIC, HK$686 million of Xiaomi and HK$649 million of Alibaba, exchange data compiled by Eastmoney showed. Xiaomi gained more than 3% on the day anyway. Alibaba's current run of consecutive net selling now totals HK$6.84 billion.

This does not look like a simple switch back into mainland tech. The ChiNext and STAR 50 indices each fell more than 23% in October, Chinese financial outlet NBD reported, about double Hang Seng Tech's decline. Over the same month, mainland bank stocks including ICBC and China Construction Bank hit record highs. In both markets, money moved out of technology and growth names. On Friday itself, the Shanghai Composite fell 1.44% and the Shenzhen Component lost 2.73% while Hong Kong rose.

The pressure built through the month. On 22 October the Hang Seng Index dropped 3%, its worst session since March, as hopes for meaningful stimulus from Beijing faded and doubts spread globally over the returns on heavy AI spending. On Thursday, Alphabet's results revived those AI concerns, and Hang Seng Tech fell 2.84%.

For Hong Kong workers, the slide reaches beyond the trading screen. MPF schemes run by HSBC, Hang Seng Bank, BCT and Principal all offer constituent funds that track the Hang Seng Index, and their October unit prices should broadly mirror the index's fall. Official October MPF return figures have not yet been published.

Beijing's official October manufacturing PMI is due on Saturday. It is the first major data release Hong Kong will trade on when the market reopens on Monday.