Hong Kong remains the top investment choice for over 70 percent of retail fund investors surveyed, despite its recent lackluster stock market performance, a Hong Kong Investment Funds Association study revealed on Wednesday.

Nelson Chow Kin-hung, co-chairman of the Unit Trust Subcommittee, attributed this to “home bias”, with investors overweighting domestic equities they are more familiar with, compared to overseas markets.

Yields from Hong Kong equities have failed to impress over the past three years, down 37.5 percent among the HKIFA fund categories, the survey showed. Despite having turned positive as of July 6, Hong Kong still lags behind other fund categories in returns

“This trend is seen globally but is more pronounced in Hong Kong,” Chow said. He advised diversifying investments across markets and products to reduce risk.

READ MORE: Hong Kong retail investors remain optimistic despite uncertain outlook

The HKIFA surveyed 500 Hong Kong investors online from May 22 to 29, targeting those with annual incomes of HK$300,000 ($38,427) or more and liquid assets of at least HK$200,000.

Respondents were current or potential retail fund investors. About 72 percent of respondents favor Hong Kong for investment in the next 12 months, followed by the Chinese mainland and North America, at 63 percent and 49 percent, respectively, the survey showed.

Japan, Europe, and India are also markets of interest for Hong Kong retail fund investors.

The survey found 52 percent of investors were optimistic about Hong Kong’s economic prospects, while 29 percent were pessimistic. With regards to the mainland’s economy, 52 percent were upbeat and 24 percent were negative.

Yields from Hong Kong equities have failed to impress over the past three years, down 37.5 percent among the HKIFA fund categories, the survey showed. Despite having turned positive as of July 6, Hong Kong still lags behind other fund categories in returns.

Stocks in central and eastern Europe had been leading the gains as of July 6 since the start of the year, up 18.4 percent. However, their three-year return was the lowest at negative 43.2 percent.

Over 20 percent of surveyed investors cited China’s economic prospects as the chief factor influencing their investment decisions, followed by the global and US economic outlooks

Retail investors are most interested in investing in the artificial intelligence sector, followed by healthcare, green or ESG (environmental, social, and governance)-related industries, and banking, according to the survey.

Three quarters of investors surveyed showed a keen interest in cryptocurrencies, the HKIFA survey revealed. Of those interested, 41 percent said they prefer their exposure to be through Hong Kong-listed crypto exchange-traded funds.

Over 20 percent of surveyed investors cited China’s economic prospects as the chief factor influencing their investment decisions, followed by the global and US economic outlooks.

Most respondents expect the US Federal Reserve to cut interest rates in the last quarter of this year or the first three months of 2025.

READ MORE: HKMA in talks to expand wealth management program with mainland

China’s economy stands at a pivotal juncture, with the third plenary session of the 20th Communist Party of China Central Committee underway since Monday. The high-level meeting, which ends on Thursday, is set to chart the course for the nation’s long-term economic development.

Discussions at the meeting will focus on reforms across the board and on advancing Chinese modernization, the CPC’s core leadership announced last month.

Hong Kong stock market benchmark Hang Seng Index had recorded a weak gain of 0.06 percent to 17,739 on Wednesday.

Contact the writer at tianyuanzhang@chinadailyhk.com