Dissecting the southbound structure from various types of investment subjects, historically, retail investors and other funds are the main force of southbound capital, Guotai Haitong Securities issued a research report saying.

However, in 1Q25, insurance funds, publicly offered funds and other institutional funds promoted the net inflow of Southbound Trading of Stock Connects to a new high. Different types of investors have significant differences in their preferred sectors for Hong Kong stock market, with Chinese public offering of funds favoring tech and pharma, and insurance funds liking premiums.

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For the whole year, against the backdrop of asset shortage, there is still room for institutional funds to increase their allocation to scarce Hong Kong stock assets. The broker quantitatively estimated the 2025 net inflow of southbound funds to exceed $1 trillion.

There were obvious differences in the preferred sectors of Hong Kong stocks among different organizations. This year, southbound funds mainly flowed into internet technology and banks, such as retail, software services and banks. The driving force behind this may vary.

As the positions of private equity funds in Hong Kong stocks are relatively opaque, Guotai Haitong Securities mainly researched the incremental size of active public offerings, ETFs and insurance funds in various sectors.

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