On July 26, 2026, Hong Kong Exchange (HKEX) officially announced that starting September 1, 2026, the stock trading stamp duty rate will be reduced from 0.13% each for buyer and seller to 0.1%. At the same time, the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism received a major upgrade—the scope of southbound trading (mainland funds investing in HK stocks) targets was further expanded, adding about 50 quality companies represented by new economy, biotech, and new energy. These two policies combined not only significantly reduce trading costs but also broaden the investable range for mainland investors, further highlighting the investment advantages of the Hong Kong stock market.
Stamp Duty Cut: Directly Lower Trading Costs, Boost Market Activity
Stamp duty is a key component of HK stock trading costs. Take a transaction of HKD 1 million as an example: under the current rate, both parties pay a total of HKD 2,600 in stamp duty; after the cut, it drops to HKD 2,000, saving about 23%. This effect is especially significant for high-frequency traders and institutional investors. Historically, in 2023, HKEX reduced stamp duty from 0.13% to 0.1%, and the average daily turnover subsequently rose by about 15%. This latest cut is expected to attract more short-term capital inflow and further improve HK stock liquidity.
Meanwhile, the Hong Kong Securities and Futures Commission (SFC) simultaneously announced an optimization of the transaction levy structure and reduction of other miscellaneous fees. It is estimated that the comprehensive trading cost has dropped by nearly 30%, making HK stocks more competitive among global major markets. Compared with A-shares' current one-sided stamp duty of 0.1%, HK stocks charge both sides but have a lower total rate (0.2% vs A-shares' 0.1% one-sided, but HK stocks have no transfer fees or other hidden costs). For investors preferring short-term trading, HK stocks' T+0 rule and no price limit combined with low fees form an excellent combination.
Stock Connect Expansion: Diversified Quality Targets, Upgraded Interconnection
This expansion of southbound Stock Connect targets focuses on about 50 new economy companies from the Hang Seng Composite Index with large market caps and good liquidity, covering AI, biotech, new energy, consumer electronics, and other high-growth areas. These include several leading companies not listed on A-shares, such as a top AI chip design company and a biopharma unicorn. This means mainland investors can directly participate in these scarce targets via Stock Connect without needing to exchange currency or open a Hong Kong account.
According to HKEX data, as of June 2026, cumulative net southbound purchases exceeded HKD 3 trillion, with the proportion of HK stock market cap rising from 3% in 2020 to 8%. After this expansion, more mainland public funds, insurance funds, and individual investors are expected to allocate HK stocks via Stock Connect. GF Securities strategy analysts pointed out: "The expansion of Stock Connect targets is a milestone driven by both internationalization and mainlandization of the HK stock market, which not only increases trading volume but also optimizes market structure, making HK stocks an important channel for global capital to allocate to China's new economy."
Multiple Advantages of HK Stock Investment: Valuation Trough, High Dividends, Flexible Rules
Besides the new policy dividends, HK stocks themselves possess many attractive traits. First, valuation advantage is obvious. As of July 2026, the Hang Seng Index P/E ratio is about 9 times, far lower than NASDAQ's 25 times and also lower than A-share CSI 300's 12 times. Meanwhile, many quality HK stocks such as Tencent, Alibaba, and Meituan have significant valuation discounts compared with their US counterparts, providing a margin of safety. Second, the average dividend yield of HK stocks is about 3.5%-4%, while the Hang Seng High Dividend Yield Index components can reach over 6%, highly attractive for investors seeking stable cash flow. Third, HK stock trading rules are flexible, supporting T+0 same-day trading, no price limits, and allowing short selling, offering rich strategies including arbitrage, hedging, and short-term trading.
In addition, the HK stock market is highly internationalized, gathering a large number of global institutional investors, with strict corporate governance and information disclosure standards and high costs for fraud. This makes HK stocks more suitable for long-term value investing. Many mainland investors also regard HK stocks as a "value zone" and allocate undervalued blue chips and high-growth new economy companies through Stock Connect.
Cross-Border Investment Practice: Stock Connect Account Opening and Cost Analysis
For mainland investors, investing in HK stocks via Stock Connect is the most convenient method. Currently, individual investors need to meet the requirement that the average daily securities account assets (including cash, stocks, funds, etc.) over the previous 20 trading days are no less than RMB 500,000. Once qualified, they can apply directly through the broker's app without opening an additional Hong Kong account. During trading, Stock Connect quotes in HKD but automatically converts to RMB at the day's exchange rate for settlement, and funds do not need to leave the country.
It should be noted that Stock Connect carries some exchange rate risk. Investors should monitor the HKD/CNY exchange rate fluctuations, especially for long-term holdings, as exchange rate changes may affect actual returns. Additionally, Stock Connect transaction fees include stamp duty, transaction levy, trading fee, and securities portfolio fee, slightly higher than directly opening an account in Hong Kong, but after the new stamp duty cut, overall costs have been significantly optimized. It is recommended that investors use the cost calculation tool provided by their broker to accurately calculate the comprehensive fee for each trade before trading.
Future Outlook: Policy Support and Market Resonance, HK Stocks Enter Allocation Window
Overall, the stamp duty cut and Stock Connect expansion announced on July 26, 2026, are consecutive measures taken by the Hong Kong SAR government and HKEX to enhance market attractiveness. Against the backdrop of stabilizing global interest rates and steady recovery of China's economy, the valuation advantages of HK stocks and the dividends of institutional reforms are expected to resonate. A recent Goldman Sachs report upgraded the rating on HK stocks to "overweight," believing that the current period is a good time to allocate HK stocks over the next 12 months.
For mainland investors aiming for global asset allocation, increasing allocation to HK stocks now can both enjoy the dividends of high-quality growth companies and diversify single-market risk. It is recommended that investors focus on the scarce targets newly included in Stock Connect, as well as high-dividend bond-like sectors such as utilities and finance. At the same time, pay attention to position control, reasonably use T+0 rules for swing trading, and set stop-loss and take-profit levels. In short, the HK stock market is becoming increasingly open and efficient, and its investment advantages will be further highlighted with the push of new policies.
