HK Financial Stocks Surge 11% in July, Posting Best Monthly Performance in Nearly Two Years
N.R. Finch
The Hang Seng Financials sub-index rose 11% in July — its best month since September 2024 — led by HSBC and BOC Hong Kong with gains above 30%; a massive rotation out of AI into dividend-yielding banks drove the rally, though valuations now sit above their historical average.
How strong was this rally?
The Hang Seng Financials sub-index gained 11% in July. The last comparable move was September 2024.
The broader Hang Seng Index rose just 0.3% over the same period — financials outperformed by nearly 11 percentage points.
Year-to-date, the financials sub-index is up 13% and has hit an all-time high.
Why did money suddenly pour into banks?
Janus Henderson portfolio manager Sat Duhra said a massive sector rotation swept Asian markets this month — capital fled AI-linked positions and moved into defensive plays like banks and financials.
This means → the buying was not driven by improved bank fundamentals; it was a risk-off shift toward stable dividend yields.
Doubts over the durability of the AI boom accelerated the switch. In plain terms = investors had ridden the AI trade long enough to get nervous, and parked the proceeds in stocks that pay steady dividends.
Which stocks gained the most?
HSBC Holdings and BOC Hong Kong each surged more than 30% in July. Bank of China rose roughly 22%.
This reflects a clear preference for two kinds of names: blue-chip sector leaders and high-dividend mainland bank stocks listed in Hong Kong.
Morgan Stanley expects financials to keep outperforming in the second half, citing growing investor confidence in the sector's more stable earnings profile and return-on-equity outlook.
After such a run, is the sector still cheap?
The financials sector trades at a price-to-book ratio — share price relative to net asset value per share — of roughly 1.08×, slightly above the historical average of 1.04×.
That is still well below the April 2015 peak of about 1.5×.
This means → valuations are no longer cheap, but they are not stretched either. Whether the rally extends depends on earnings delivery and continued fund inflows.
Content is for reference only, not financial advice.