Buying more as prices decline, capital is increasing its holdings in Hang Seng Tech ETF against the market trend. Who is taking action?

On September 28, the Hang Seng Tech Index extended its correction, closing down 0.37% and notching the second lowest close of the year, only higher than that on June 26; since September, the index has posted a cumulative decline of more than 7%.

In sharp contrast to the continuous downtrend of the index, capital is taking the opportunity to increase positions against the market trend via ETFs. Wind data shows that as of September 25, 10 ETFs tracking the Hang Seng Tech Index have recorded a total net inflow of 42.55 billion yuan since September, with their total share count rising by 7.421 billion; in contrast, in July and August earlier, these 10 ETFs saw total net outflows of 90.16 billion yuan and 9.2 billion yuan respectively, with their share count decreasing by 14.77 billion and 1.434 billion respectively. What signals does this divergence between falling prices and rising capital positions send out?

Why "Buying More As Prices Fall"?

Since the start of this year, affected by factors including overseas energy shocks, inflation concerns, rising interest rate hike expectations, and intensifying internal competition in the AI track, the Hang Seng Tech Index has remained under sustained pressure, with a year-to-date decline of over 21%, underperforming the Hang Seng Index by 16 percentage points.

However, despite the sluggish performance of the secondary market, incremental capital has continued to flow in at low levels since September.

By product, the Hang Seng Tech ETF under Huatai-PineBridge saw its share count rise by 4.072 billion within the month, reaching a size of 32.753 billion yuan; the product under China Asset Management ranks first with a size of 39.126 billion yuan, with its share count increasing by 1.721 billion within the month; the relevant products of E Fund, Tianhong Asset Management and GF Asset Management all posted a share increase of over 300 million.

Southbound capital has also continued to pour in, recording net buying for 16 consecutive trading days since September 7, with a cumulative amount of over 500 billion yuan; among which, net buying exceeded 20 billion Hong Kong dollars in the week from September 21 to 25, marking the fifth consecutive week of net inflow.

The confidence to "buy more as prices fall" first comes from valuation. Data from China Galaxy Securities shows that as of September 25, the PE and PB of the Hang Seng Tech Index stood at 22.93x and 2.33x respectively, at the 33rd and 17th percentile of their levels since 2010. Institutions believe that the absolute valuation of the Hang Seng Tech Index has approached the historical low, with a relatively high safety margin. After short-term disturbances are gradually digested, the sector is expected to usher in an upward recovery.

The "Living Water" of Long-term Capital Is Unleashed

Another major variable in the market capital side comes from the expansion of insurance capital allocation policies.

Several insurance institutions recently received the *Letter on Clarifying the Regulatory Caliber for Insurance Funds to Invest in ETFs under the Hong Kong Stock Connect* issued by the State Administration of Financial Regulation, which clarifies that insurance institutions qualified for stock investment under the Hong Kong Stock Connect can invest in Hong Kong Stock Connect ETFs, in accordance with the regulatory rules for insurance funds investing in Hong Kong Stock Connect stocks. This move aims to optimize the allocation structure of insurance assets and standardize the investment of insurance funds in Hong Kong Stock Connect ETFs, and the caliber has taken effect since September 20.

Data from the State Administration of Financial Regulation shows that as of the end of June 2026, the balance of insurance funds in use has exceeded 40 trillion yuan; among which, the total balance invested in stocks and securities investment funds reached 6.39 trillion yuan.

Industry experts said that against the backdrop of falling interest rates and sustained asset shortage, the expansion of Hong Kong Stock Connect ETFs provides insurance funds with a new cross-border allocation tool featuring high efficiency and low cost. Tech-focused Hong Kong Stock Connect ETFs such as those tracking the Hang Seng Tech Index are expected to become one of the key areas of concern for insurance funds.

The latest research note from Huatai Securities Quantitative Research Team points out that this move opens up a compliant channel for insurance funds to allocate ETFs via the southbound route, substantially expanding the allocation toolbox. The dividend income of high-dividend and dividend-focused ETFs is included in the net investment income, which matches long-duration liabilities, supports the net investment yield, and eases the pressure of asset shortage under low interest rates. Meanwhile, ETFs are inherently more suitable for taking on flexible allocation and style rotation functions. The tech, biotech and global multi-asset varieties in the Southbound ETF Connect list just provide insurance funds with flexible exposure and return enhancement tools that match this accounting attribute.

The Non-Banking Financial Team led by SUN Ting of Soochow Securities believes that there are currently 31 ETFs included in the Hong Kong Stock Connect, with a total size of 321.9 billion yuan, all of which are equity funds; the Hong Kong Stock Connect channel does not occupy QDII quotas, allowing more flexible allocation scales, and it includes cross-border investment products, which may become a new breakthrough for mainland insurance institutions' overseas investment. However, the team also reminds that for mainland insurance institutions, overseas high-yield fixed income assets better meet current allocation needs, and overseas equity is not yet sufficient to become the main allocation target in the short term.

This article is from the WeChat Official Account "ChiNext Observation", written by Chen Yonghui, and published by 36Kr with authorization.