HSBC Research has published a report noting that both domestic and northbound funds have increased their holdings in AI infrastructure and finance sectors, while maintaining a cautious stance towards consumer-related industries.

This year, southbound funds have cumulatively flowed in HKD800 billion, setting a historical record, with recent focus shifting to finance and healthcare sectors. The sectors most underweighted by active mutual funds were banks > non-bank finance > utilities > catering.

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According to the report, institutional investors showed a clear preference for the infrastructure segment within the AI value chain in 2Q25. Domestic funds ramped up their allocation to AI infrastructure by 2.4 ppts, with spotlight on optical module suppliers, while northbound funds increased their allocation by 0.7 ppts, favoring semiconductor companies. Both reduced their exposure to AI enablers and adopters.

Moreover, both domestic and northbound investors decreased their allocation to food and beverages, automobiles, and home appliances, signaling concerns over consumer-related sectors.