Southbound capital swings to HK$1.3 billion net sales on AI buying

Southbound capital swung to net sales of HK$1.316 billion on Aug 14, with mainland investors piling into domestic large language model stocks while trimming Alibaba-W.

"The industry is shifting from price competition to intelligence-driven commercialization," Morgan Stanley said after DeepSeek raised its API pricing on Aug 8, a move the bank read as a positive signal for pricing discipline across the sector.

The Shanghai-Hong Kong Stock Connect recorded net purchases of HK$287 million, while the Shenzhen leg saw net sales of HK$1.603 billion. MINIMAX-W (00100) drew HK$1.364 billion and Zhipu AI (02513) HK$1.321 billion, while Tencent (00700) added HK$1.114 billion.

The rotation shows mainland capital concentrating on AI monetization plays even as the broader market contends with elevated oil prices and the unresolved Strait of Hormuz standoff.

AI names dominate as pricing discipline improves

Morgan Stanley said three structural changes are occurring at once: more rational pricing, tighter open-source licensing, and a leap in model parameter scale. The bank's read followed DeepSeek's decision to raise API prices, which it interpreted as evidence the industry is moving away from a price war.

Tencent's HK$1.114 billion inflow came as BOCOM International flagged that the market remains focused on whether incremental revenue from the company's AI business can offset rising research and development expenses and capital expenditure. The brokerage still backs the strategic logic of Tencent accelerating investment in the AI wave, and will watch the release of Hunyuan 4.0 and the commercial conversion rate of AI applications in the second half.

Chip and fiber names draw support

SMIC (00981) recorded net purchases of HK$644 million after reporting second-quarter revenue of US$3.006 billion, up 36.1 percent year on year and 20 percent quarter on quarter — the first time quarterly revenue crossed the US$3 billion mark. Gross margin came in at 25.3 percent, up 4.9 percentage points year on year. Goldman Sachs said revenue and gross margin beat both its estimates and the company's guidance, and maintained a Buy rating.

Yangtze Optical Fibre and Cable (06869) drew HK$395 million, with Daiwa Securities projecting a net profit compound annual growth rate of 135 percent from 2025 to 2028 on the strength of the optical fiber upcycle. Kingboard Laminates (01888) added HK$254 million.

Alibaba and Hua Hong lead outflows

Alibaba-W (09988) saw the largest net sales at HK$1.062 billion, while Hua Hong Hongli (01347) recorded net sales of HK$166 million. UBS said Hua Hong's second-quarter revenue met expectations but gross margin and EBIT outperformed on higher average selling prices and cost controls, while net profit lagged on weaker other income. The bank warned that intense competition in mature process nodes and overcapacity may continue to pressure profitability.

The flows come as the Hang Seng Index and Shanghai Composite have diverged through 2026, with Hong Kong's heavier weighting toward internationally accessible technology names making it more exposed to shifts in foreign investor sentiment. Southbound flows have been a key support for HK-listed Chinese equities, and the Aug 14 swing to net sales marks a pause in that accumulation.

This article is for informational purposes only and does not constitute investment advice.