Japan's Nikkei 225 , Korea's Kospi and blue chip CSI 300 indexes were all up by at least 2 percent in January as of Thursday morning.

Still, the Hang Seng is up by more than 3 percent in the new year, a move mirrored by other major markets as investors bet on continued global growth.

On Thursday, however, the index took a pause, trading near the flat line as of 2:35 p.m. HK/SIN on weakness in some of its most heavily-weighted constituents: Tencent fell 2 percent and insurer AIA was lower by 0.3 percent.

Wednesday's session saw the 51-stock index close higher for the 12th straight day, marking the benchmark's longest winning streak since it was first started in 1969. That beat the 11-day streak last recorded by the Hang Seng in 1999.

The rise in the Hang Seng, which has risen more than 6 percent since its streak began in late December, was largely driven by large inflows into Hong Kong, analysts told CNBC.

The introduction of the Shenzhen-Hong Kong Stock Connect at the end of 2016 was credited as one of the reasons for the Hang Seng's rally last year. The program, similar to the Shanghai-Hong Kong Connect, allows investors on the mainland and Hong Kong to invest in stocks listed in both markets.

Capital from the mainland has continued to play a role in driving the Hang Seng higher in the first two weeks of 2018.

According to Kenny Wen, a Hong Kong-based strategist at Everbright Sun Hung Kai, mainland investors upbeat about Hong Kong and optimistic retail investors in the territory have created a "feast of liquidity" in the market.

Also contributing to that liquidity is the reallocation of capital by global funds keen to increase their exposure to Hong Kong due to its lower valuations relative to the U.S. and Europe, Wen said.

The Hang Seng is currently trading at a price-to-earnings ratio of 14.16, a figure that is significantly below the Dow Jones industrial average's 22.83 or even the Nikkei 225's 19.62.

Mainland flows into Hong Kong under the connect programs accounted for more than 6 percent of market turnover last year, and they are expected to "increase further in the years ahead," analysts at Credit Suisse said in a December note on the outlook for greater China markets.

"[That] means that the Hong Kong market performance would be increasingly driven by the interaction of both the U.S. market performance (influencing global liquidity) and A-share market performance (influencing mainland liquidity)," Credit Suisse analysts added, referring to stocks traded in mainland markets.

Amid the New Year cheer, analysts also warned about a potential correction in the works for the market — although they indicated it would not be imminent.

"There's still time on our hands when it comes to [a correction in] Hong Kong," said Andrew Clarke, director of trading at Mirabaud Asia.

Hong Kong stocks typically rally around the Lunar New Year, which begins on Feb. 16 this year, Clarke said, suggesting that a slight correction could follow that run up.