On July 28, 2026, the Hong Kong Exchange issued an announcement, declaring a new cooperation consensus with mainland exchanges to further optimize the stock market connectivity mechanism. New measures include lowering trading thresholds, expanding the scope of eligible securities, and launching cross-border risk management tools. This move is seen as a major positive for the HK stock market, expected to attract more mainland investors and global capital.
Connectivity Upgrade: Lower Thresholds and Expanded Targets
According to the announcement, from September 1, 2026, the entry threshold for individual investors under the Stock Connect will be lowered from an average daily asset of no less than RMB 500,000 over 20 consecutive trading days to RMB 300,000. At the same time, the scope of eligible securities under the Stock Connect will include more small- and mid-cap companies, including some high-quality enterprises in the biotech and new economy sectors. In addition, the two exchanges will jointly launch "cross-border derivatives" products to facilitate investor risk management.
Market analysts believe this policy will significantly expand the participation base of mainland investors. A research report from Huatai Securities points out that the threshold reduction is expected to bring about 8 million new qualified investors, potentially bringing incremental funds to HK stocks in the short term. In the long run, the expansion of eligible securities will help improve liquidity and pricing efficiency in the HK stock market, especially for small- and mid-cap companies whose valuations are expected to recover.
Low Valuations Attract Global Funds: Hang Seng Index PE at Historical Bottom
As of July 29, 2026, the Hang Seng Index's price-to-earnings ratio (PE) is only 9.8 times, one standard deviation below the 10-year average and significantly lower than the S&P 500's over 20 times. Its price-to-book ratio (PB) has also dropped to 0.92, near the book value. Compared with major global markets, Hong Kong stocks are currently one of the most undervalued major stock markets.
Low valuations have attracted substantial inflows from southbound funds and overseas long-term capital. According to HKEX data, since July, southbound funds have had an average daily net inflow of HK$4.5 billion, a 30% increase from the first-half average. Funds have mainly flowed into technology, finance, and consumer sectors. Overseas institutions such as BlackRock and Morgan Stanley have recently upgraded their ratings on HK stocks, believing that the valuation recovery trend may continue.
Core Advantages of HK Stock Investment: Policy Dividends and Fundamental Support
Besides low valuations, the HK stock market has multiple advantages:
- Continuous Release of Policy Dividends: In recent years, financial cooperation between the mainland and Hong Kong has deepened, including mechanisms such as Cross-boundary Wealth Management Connect, ETF Connect, and RMB Dual Counter, providing investors with diversified choices.
- Concentration of High-Quality Companies: HK stocks gather leading Chinese new economy stocks like Tencent, Alibaba, Meituan, and Xiaomi, as well as numerous high-dividend state-owned enterprise stocks, catering to different risk preferences.
- Flexible Trading Rules: HK stocks support T+0 same-day trading, no price limit, and mature short-selling mechanisms, suitable for professional investors to hedge and arbitrage.
- Dividend Tax Reform Expectations: The market generally expects further reduction of dividend tax on Stock Connect, improving actual returns.
Risk Warnings and Investment Strategies
Despite frequent positives, investors should note the following risks: First, global liquidity tightening may suppress valuations; second, geopolitical risks could impact market sentiment; third, some small- and mid-cap companies have poor liquidity.
For novice investors, it is recommended to start with Stock Connect ETFs or low-volatility high-dividend stocks, gradually learning market rules. Focus on core targets such as the Hang Seng Tech Index and the High Dividend SOE Index, using dollar-cost averaging to reduce volatility. At the same time, learn HK stock trading rules, including board lots, transaction fees, settlement cycles, etc., to avoid operational errors.
Conclusion
In the second half of 2026, with the triple positives of connectivity optimization, low valuations, and capital inflows, investment opportunities in HK stocks are prominent. For mainland investors, now is a good time to learn about HK stock investment and position in high-quality targets. YueShi Finance will continue to track market dynamics and provide you with the latest analysis.
