US investor sentiment towards Hong Kong and China equities has shifted notably, with US$14 billion in inflows over the three-month period to the end of February – the largest quarterly inflow in more than three years – lifting total holdings to US$466 billion, a record high, according to a BNP Paribas report on Thursday.

“This may suggest a shift in the willingness of US capital owners to allocate more capital to Chinese equities after the substantive outflows seen between 2021 and the first half of 2025,” said William Bratton, head of cash equity research of Asia-Pacific at BNP Paribas, in the report.

Before the start of the US-Israel war on Iran on February 28, US resident investors were active in buying Asian equities, the latest data from the US Treasury International Capital (TIC) system showed.

Kenny Ng Lai-yin, a strategist at Everbright Securities International, said the strong US investor interest was the result of several factors, including Middle East instability, a sluggish dollar and relatively attractive valuations for Asia-Pacific stocks.

Despite the rally in US stocks in recent days, Ng said diversification by US investors could continue over the long term.

Hong Kong initial public offerings (IPOs) were attracting strong overseas demand as global funds rebuilt their exposure to China after years of underinvestment, said Bonnie Chan Yiting, CEO of Hong Kong Exchanges and Clearing.