HONG KONG is on track to become the world’s worst-performing major stock market this year amid its poorest performance in a decade, but investors are raising bets that the sell-off is overdone.

“From a valuation perspective, it’s a good buying opportunity,” said Zhu Haifeng, an investor who has been boosting exposure to Hong Kong’s internet stocks via exchange-traded funds (ETFs).

Despite short-term volatility, “I’m very optimistic toward Chinese internet firms such as Alibaba, Tencent and Meituan over the long term,” he said.

More than a billion dollars worth of funds from the mainland gushed into ETFs targeting Hong Kong stocks over the past month, while mainland money flows into Hong Kong’s bourse via the stock connect trading link hit a six-month high in December, exchange data show.

In addition, there was a burst of share buy-backs from Hong Kong-listed companies, including Xiaomi Corp. and WuXi Biologics, during the month.

The Hang Seng Index has slumped nearly 15 percent so far in 2021, and the Hang Seng Tech Index has tumbled 33 percent. In contrast, the Shanghai Composite Index is up roughly 4 percent.

Offshore mainland stocks far underperformed A shares listed in Shanghai and Shenzhen under the double whammy of Hong Kong’s shrinking liquidity and mainland regulators’ regulation against internet giants — most of which are listed overseas, wrote Hong Hao, head of research at BOCOM International.

But he said the Hang Seng is “showing deep allocation value” and such divergence between offshore and onshore Chinese market is unlikely to last.

Wan Chengshui, portfolio manager at Golden Eagle Fund Management Co., said he believed the rocky Sino-U.S. relationship had already hit a bottom.

“I think the relationship between China and the United States will likely improve a bit next year, thus luring U.S. and European money back to the Hong Kong market, benefiting stocks.”

ChinaAMC Hang Seng Technology ETF saw its assets under management (AUM) jump 55 percent over the past month to 5.5 billion yuan (US$863.4 million), despite a decline in the underlying index.

ChinaAMC Hang Seng Internet & IT ETF witnessed a 30 percent jump in its AUM to 18 billion yuan. Net flows into Hong Kong stocks under the stock connect programs exceeded US$10 billion in December. (SD-Agencies)