(Bloomberg) -- Chinese investors are pulling back from Hong Kong’s stocks at the fastest pace in more than five years, threatening to deepen a selloff.
Onshore traders have sold a net HK$24 billion ($3.1 billion) of Hong Kong shares through a trading link in October through Thursday, according to data compiled by Bloomberg, putting the month on track for the biggest outflow since 2021.
Mainland investors have traditionally been staunch buyers of Hong Kong stocks, providing support during market downturns. Their exit bodes ill for the financial hub, where stocks have been on a three-month decline on waning enthusiasm for artificial intelligence plays and rising funding costs. The Hang Seng Index has historically suffered extended pullbacks when Chinese flows turned negative.
“The Hong Kong market could still correct another 10% to 15% before establishing a bottom,” said Jasmine Duan, senior investment strategist at RBC Wealth Management Asia. “The market remains most sensitive to US Treasury yield movements and fund flow dynamics.”
Technology stocks have borne the brunt of the selloff. Chipmaker Semiconductor Manufacturing International Corp., e-commerce platform Alibaba Group Holding Ltd. and electric vehicle producer Xiaomi Corp. are among those heavily sold by mainland investors.