Hong Kong Stocks Rally as UBS Predicts $236 Billion Fund Inflows Amid Chinese Market Support Measures

Hong Kong stocks climbed on Monday, positioning the Hang Seng Index for a winning month, as investors responded positively to China's measures to reinforce its financial markets amidst the pressure from U.S. tariffs.

UBS estimated that these new policies could lead to inflows worth US$236 billion, boosting market sentiment.

The Hang Seng Index rose by 1 percent to reach 20,224.73 as of 3:10 p.m. local time, marking a 0.9 percent gain for the month. Meanwhile, the Tech Index advanced 1.4 percent. Hong Kong’s benchmark index has recorded winning Januarys every year since 2021, apart from a 9.2 percent drop last year.

In contrast, mainland Chinese markets weakened ahead of the week-long Lunar New Year holiday. The Shanghai Composite Index, which had earlier gained 0.7 percent, reversed its performance and ended the day lower. For the month, it shed 3 percent, as did the broader CSI 300 Index.

Baidu led the gains in Hong Kong, surging 4.2 percent to HK$84.95. Alibaba Group rose 3.2 percent to HK$87.45, while Galaxy Entertainment Group, a Macau casino operator, climbed 3.2 percent to HK$32.75. Travel operator Trip.com added 1.7 percent to reach HK$550.50, and smartphone maker Xiaomi rose 0.8 percent to HK$37.15.

Swiss investment bank UBS projected that China’s plan to inject more long-term capital into its stock market could channel as much as 1.7 trillion yuan (US$236.2 billion) from insurers, mutual funds, and social security funds into equities.

The China Securities Regulatory Commission announced additional measures on Sunday to expand index-linked financial products and identified a group of insurers to participate in a market-support program. These measures are part of Beijing’s broader strategy to counter the adverse effects of U.S. trade policies.

“The measures will attract medium- and long-term funds to enter the market, especially the global funds,” stated Jason Chan, senior equity strategist at the Bank of East Asia. He added, “Many foreign investors are monitoring the development in exchange-traded funds and are hoping to tap the market.”

Last week, former U.S. President Donald Trump threatened to impose tariffs on Chinese goods starting next month, further intensifying economic tensions. He also revealed plans to surpass China in the global race for leadership in artificial intelligence.

In related news, China’s Purchasing Managers’ Index (PMI) for manufacturing dropped to 49.1 in January from 50.1 in December, signaling a contraction in activity. The services PMI also weakened, falling to 50.2 from 52.2 in the prior month, according to data from the National Bureau of Statistics. Goldman Sachs attributed this slowdown to reduced activity ahead of the Lunar New Year holiday.

Onshore financial markets in China are set to close from January 28 to February 4 for the holiday, while Hong Kong markets will observe shorter closures from midday on January 28 through January 31.

Two companies debuted on mainland Chinese exchanges with remarkable performances.

Beijing Haibo Si Chuang Technology soared 229 percent to 63.80 yuan in Shanghai, while Yalian Machinery surged 159 percent to 49.50 yuan in Shenzhen.

Elsewhere in Asia, market performance was mixed. South Korea’s Kospi Index gained 0.9 percent, Australia’s S&P/ASX 200 increased 0.4 percent, while Japan’s Nikkei 225 fell 0.9 percent.

The combination of China’s policy measures and UBS’s optimistic outlook has bolstered confidence in Hong Kong stocks, setting the stage for a positive start to 2025 in the region’s financial markets. 

By fLEXI tEAM