By Sherry Qin

Hong Kong-listed technology stocks have been falling in April as markets were roiled by U.S. tariffs, but that hasn't stopped mainland Chinese investors from pouring billions into the sector, a trend analysts expect will continue.

Since the start of the month, mainland investors bought $21.08 billion of Hong Kong stocks through the Southbound Connect Program, which links the city's exchange to its counterparts in Shanghai and Shenzhen, according to data from financial platform Wind Information. That came even as the benchmark Hang Seng Index dropped 7.4% and tech heavyweight Tencent lost 7.2%.

Net buying on April 9--days after U.S. President Trump's "Liberation Day" tariffs--hit a record high of $4.58 billion. Part of that is down to the profile of Southbound investors, who tend to be more focused on future rewards than current headwinds, experts say.

These mainland investors make up a quarter of all trading activity on the Hong Kong exchange and have massive savings on tap, with Chinese households sitting on a $22 trillion cash pile, HSBC analysts estimate.

Over the longer term, they could serve as "anchoring investors" for the Hong Kong market, providing consistent support and liquidity and enhance its overall stability, said CGS International analyst Edith Qian.

A combination of enthusiasm about technological breakthroughs, low exposure to Western markets and strong earnings is buoying expectations that China's tech industry can withstand the U.S.-China trade war. Attractive valuations after the recent selloff have heightened the appeal of big names, like Alibaba, which aren't listed in mainland markets.

"The logic of [the] Chinese stock market is different," said Dan Wang, China director at consultancy Eurasia Group. Market participants are more focused on tech companies' fundamentals, and potential in fields like artificial intelligence, rather than on tariff fears, she said.

Tariff shocks have pared year-to-date gains on the Hang Seng Index, but it remains up around 6% so far this year, while the Nasdaq-like Hang Seng Tech Index is up 9%. Alibaba, Tencent, and Xiaomi were the top three most purchased stocks via the Southbound Connect over the past three months, according to Wind Information.

China's tech companies are "mostly sheltered from the tariff war, and the risk-reward looks increasingly appealing," Barclays analysts led by Jiong Shao said.

Beyond the tariff noise, mainland investors are hoping for more DeepSeek-like tech breakthroughs in China, said Jason Lui, BNP Paribas's head of east Asia strategy. The emergence of the Chinese AI startup's low-cost yet powerful large-language model in January shattered conceptions that China is far behind in the AI space, fueling a rally in tech stocks.

To be sure, Southbound activity will be subject to geopolitical tensions and domestic market activity, but BNP's Lui notes that net inflows are track to top 2024's, which were around $100 billion.

Net inflows from onshore funds into Hong Kong's equity market through the Southbound channel in the first quarter was at $56.16 billion, already more than half of last year's, according to Wind data.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

April 17, 2025 00:57 ET (04:57 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.