Southbound funds flow into HK dividend stocks for four straight weeks; Fed rate hike boosts appeal of high-yield assets

Since the second half of 2026, the Hong Kong stock market has experienced heightened volatility amid a correction in growth-style stocks. With short-term market themes remaining unclear, the allocation focus of southbound capital has gradually shifted back to Hong Kong-listed dividend-yielding assets, which are characterized by high dividends and low valuations.

According to Wind data, from August 24 to September 18, southbound funds recorded net inflows for four consecutive weeks, accumulating a total of RMB 42.209 billion. By Hang Seng industry classification, sectors with high dividend yields—such as Industrials, Energy, Properties & Construction, and Financials—saw the largest net inflows. Over the past month (August 18 to September 18), these sectors received net purchases of RMB 7.075 billion, RMB 3.581 billion, RMB 2.311 billion, and RMB 1.295 billion, respectively. This trend not only underscores the allocation value of Hong Kong dividend assets but also strengthens their liquidity support.

Overseas Liquidity Shifts: Fed Rate Hike Adds Pressure

Meanwhile, the overseas liquidity environment has also undergone new changes. In the early hours of September 17 (Beijing time), the U.S. Federal Reserve raised interest rates by 25 basis points, lifting the federal funds rate target range to 3.75%–4.00%. This marks the first rate hike since July 2023, with all 12 voting members in favor. The dot plot indicates that 16 of the 18 officials providing rate forecasts expect at least one more rate hike this year, reflecting a generally hawkish tone.

Rising overseas interest rates may suppress valuations of long-duration, high-valuation growth assets. In contrast, Hong Kong dividend assets—characterized by shorter cash flow duration and relatively higher dividend yields—are less sensitive to changes in discount rates and are expected to demonstrate resilience under current market conditions.

Analyst View: Tactical Allocation with Downward Structural Adjustments

A research report from Huatai Securities further notes that following the FOMC decision, implied bearish sentiment and negative gamma volatility in the options market have moderated, leading to technical improvements. However, the broader challenges facing Hong Kong stocks—tightening overseas liquidity and a lackluster domestic fundamental backdrop—remain unchanged.

In terms of allocation, Huatai suggests that Hong Kong dividend assets may still serve as a suitable core holding, but structural adjustments are necessary. Investors should control exposure to sectors where the dividend yield advantage over A-shares is narrowing and where dividend payout ratios are difficult to increase. Recommended areas include petrochemicals and gas, which offer better cost-effectiveness, as well as defensive sectors such as telecommunications and public utilities.

(Source: Huatai Securities, "Hong Kong Stock Strategy: Maintain Flexibility in Hong Kong Stock Positions," published September 20, 2026)

Dividend Yield Advantage Remains a Key Support

Beyond liquidity changes, the relatively high dividend yield of the underlying index remains a key factor reinforcing the allocation logic for Hong Kong dividend assets. For example, the Huatai-PineBridge Hong Kong Stock Connect Dividend ETF (513530), a popular product under the "Dividend Family" series, tracks the Hong Kong Stock Connect High Dividend (CNY) index. As of September 18, 2026, the index's latest dividend yield stood at 5.01%, outperforming the CSI Dividend Index (4.31%), the Shenzhen Dividend Index (3.78%), and the Dividend Low Volatility 100 Index (4.44%). It also significantly exceeds the yield on China's 10-year government bonds (1.68%), with the spread wider than in 43% of the past decade.

(Data as of September 18, 2026. Note: Government bonds and equities carry different risk profiles; investors should consider all investment risks comprehensively.)

ETF Liquidity Improves Amid Rising Demand

As interest in Hong Kong dividend assets grows, the Huatai-PineBridge Hong Kong Stock Connect Dividend ETF (513530) has attracted market attention as a tool for accessing high-dividend Hong Kong stocks. Since August 28, the product's average daily trading volume has reached RMB 253 million, a significant increase from the RMB 196 million average recorded from the beginning of the year to August 27, highlighting its improving liquidity.

(Source: Wind, data as of September 18, 2026)

About Huatai-PineBridge's "Dividend Family" Series

The Hong Kong Stock Connect Dividend ETF (513530) is managed by Huatai-PineBridge Fund Management, one of China's first ETF managers. The firm has accumulated nearly 20 years of experience in dividend-themed index investing, offering a diversified suite of products under its "Dividend Family" series covering both A-shares and Hong Kong stocks.

Key products include:

• Dividend ETF (510880): The first A-share dividend-themed index fund, with 422,900 holders as of mid-2026.
• Dividend Low Volatility ETF (512890): Its feeder fund has 1.4838 million holders.
• Central SOE Dividend ETF (561580): The first A-share ETF combining "central SOEs + dividends."
• Hong Kong Stock Connect Dividend ETF (513530) and Hong Kong Stock Connect Dividend Low Volatility ETF (520890): Both focus on Hong Kong high-dividend assets. The former uses a QDII structure, offering advantages in Hong Kong dividend tax treatment, while the latter incorporates a low-volatility factor for enhanced defense in volatile markets.
• Dividend Quality ETF (561630): Uses a "dividend + quality" dual-factor stock selection strategy, targeting fundamentally sound, high-dividend stocks with strong earnings.
• Dividend Low Volatility 50 ETF (561450): Combines "dividend + low volatility" factors with a focus on high-quality blue-chip stocks.

(Holder data source: Fund periodic reports, as of June 30, 2026. Establishment dates: Dividend ETF 510880 – November 17, 2006; Dividend Low Volatility ETF 512890 – December 19, 2018; Central SOE Dividend ETF 561580 – May 18, 2023)

Note: The "Dividend Family" refers to the above seven products, all classified as Risk Level R3. Risk ratings may vary by sales institution based on applicable investor suitability regulations.

Fee Note: For subscriptions/redemptions of Dividend Low Volatility 50 ETF and Dividend Quality ETF, brokers may charge up to 0.30% (subscription) and 0.50% (redemption, including exchange and clearing fees). For other products, brokers may charge up to 0.50% for subscriptions and redemptions, including exchange and clearing fees. Secondary market trading commissions are determined by the broker and are exempt from stamp duty. (Source: Product legal documents, as of September 18, 2026.)

Risk Disclaimer: Investment in funds carries risks. Please read the fund contract, prospectus, and product summary carefully. Past performance does not guarantee future results. The Hong Kong Stock Connect Dividend ETF and Hong Kong Stock Connect Dividend Low Volatility ETF invest in overseas markets and are subject to additional risks including currency risk and overseas market risk. Index data is provided by respective index compilers (Hang Seng Indexes, S&P Dow Jones Indices, CSI Index) without warranty of accuracy.

Editor: Shi Xiuzhen (SF183)