South Korean investors are accelerating their allocation to Chinese assets. The Chinese market has become the second-largest overseas investment destination for South Korean investors, trailing only the U.S. market.
According to the latest data from the Korea Securities Depository (KSD), as of July 15, the cumulative trading volume by South Korean investors in the Chinese mainland and Hong Kong stock markets has exceeded $5.4 billion so far this year.
That far surpasses local South Korean investors’ investments in Japanese and European stock markets during the same period, elevating the Chinese market to the second-largest overseas investment destination for South Korean investors, second only to the US market.
Paul Chan, Financial Secretary of the Hong Kong SAR Government, recently wrote in a blog that in the first five months of this year, the trading volume of South Korean licensed institutions in Hong Kong securities exceeded HK$1.5 trillion, 2.8 times that of the whole of last year.
In terms of capital flow, South Korean funds are mainly focused on Hong Kong stocks. From the beginning of the year to July 15, Xiaomi became the favorite target, with a net purchase amount exceeding $170 million. BYD Co., Ltd. and CATL followed with net purchases of $93.1 million and $60.89 million, respectively. In addition, Pop Mart also attracted significant attention, with South Korean investors’ net purchases exceeding $34.94 million.
In the A-share market, the ChinaAMC CSI Robotics ETF has become an important channel for South Korean investors to allocate to China’s robotics industry.
Analysts believe that, unlike European and American asset management institutions that prefer large-cap or blue-chip stocks, South Korean capital clearly favors technology growth and emerging industry companies, and their trading style aligns more closely with the rotation rhythm of the Hong Kong stock market.
Furthermore, South Korean capital is also active in the primary market. South Korean investment banks have also become cornerstone investors in multiple newly listed Hong Kong stocks. According to public announcements, Mirae Asset, which wields significant influence in South Korea’s capital market, subscribed for 6.5 million shares in the cornerstone round of Cao Cao Mobility.
In the A-share market, BYD is also favored by South Korean capital, with net purchases of $8.48 million. Huatai Securities and Zijin Mining ranked second and third, respectively. In addition, Top Group and the ChinaAMC CSI Robotics ETF also made the list of key increases by South Korean investors.
The accelerated layout of South Korean capital in the Hong Kong stock market is driven both by the performance of the Chinese market and by trends in South Korea’s domestic market.
On one hand, since 2025, Hong Kong stocks have performed strongly, with the Hang Seng Index rising by about 22% as of July 16,making it one of the most active major stock indices globally, and on the other hand, the South Korean stock market showed weak performance in the first five months of 2025, only seeing a rebound after May.
In addition, the macro policy environment provides support. Recently, the Bank of Korea maintained its key interest rate at 2.50%, in line with market expectations. Analysts expect that due to the impact of US tariff policies, South Korea’s exports will slow starting from Q3, and the uncertainties in the global trade environment may affect South Korea’s economic growth prospects, further driving capital to seek asset allocation opportunities abroad.
Overall, there remains significant demand from foreign capital for China’s core assets. Shenwan Hongyuan said that foreign capital is accelerating its inflow into the Chinese market by participating in cornerstone investments of Hong Kong IPOs, with both the investment amount and proportion of foreign cornerstone investors continuously rising.
Data shows that as of June 30, in companies listed in Hong Kong in 2025, cornerstone investors accounted for 45.2%, compared to 33.2% in 2023 and 31.0% in 2024.
According to Guoyuan International, southbound funds continue to flow in, with no significant signs of outflows, indicating that market confidence is still accumulating.
Looking ahead at the Hong Kong stock market’s prospects, Zhao Longlong, fund manager of JPMorgan Hong Kong Select Fund, believes that based on stable growth policies and expectations for capital market reforms, he remains optimistic about the market in the second half.
After the value re-evaluation of core technology assets in Q1, the valuation of Hong Kong stocks has been restored, however, considering fundamentals, valuation, liquidity, risk-reward preferences, and other indicators, Hong Kong stocks still offer a relatively high cost-performance ratio for investment at present, Zhao added.