Source China Fund Daily
Since late April20prouletteAt a time of turmoil in major economies at home and abroad, Hong Kong stocks are gaining momentum and ushering in a strong performance. The current rebound market has also quickly ignited the enthusiasm of the market layout, how to seize the opportunity to deal with the Hong Kong stock market storms, has become the focus of concern of investors.
The improvement in the financial side is
An important driving force to promote the strength of Hong Kong stocks in this round
The increase in policy thrust and the trend recovery of risk appetite have greatly boosted the liquidity of Hong Kong stocks, and the improvement of the capital side is an important driving force for the strong performance of Hong Kong stocks this round.
First of all, from the perspective of domestic capital trends, the influx of Hong Kong stock link funds into Hong Kong has obviously accelerated since March, basically maintaining weekly continuous net purchases and increasing range. Since the beginning of the year, the cumulative inflow of more than 210 billion Hong Kong dollars has approached the level of 2/3 for the whole of 2023. High dividend sectors such as financial and energy industries are the main preferred targets of southbound funds (data source: Wind, as of 2024-4-30)20prouletteOn the other hand, as of Q1 in 2024, the allocation ratio of active equity public offering funds to Hong Kong stocks is 9%.20proulette.33%, up 0% from the previous quarter20proulette.62 percentage points, also providing some support for the recovery of the market rebound. (data source: Huaxi Securities, caliber for common stock, partial stock hybrid, flexible allocation fund, as of 2024-3-31)
From the perspective of more signalling foreign investment trends: under higher-than-expected inflation, the Fed's interest rate cut expectations have been pushed back, and non-US currencies such as the Japanese yen, South Korean won, Thai baht and other non-US currencies have once again faced a devaluation crisis. Previously optimistic enthusiasm for overseas investment has cooled somewhat, and global capital may have opened a new round of pricing reshuffle in order to seek asset stability and rebalance. Judging from the monthly changes in the shareholding ratio of different intermediaries in Hong Kong stocks, the proportion of international intermediary shareholdings has risen particularly rapidly since February, which may indicate that international funds have turned their attention to Hong Kong stocks with great potential. At the same time, even during the May Day holiday when southbound funds were absent, Hong Kong stocks continued their relatively strong performance, or confirmed once again that this round of market was mainly driven by non-mainland funds such as Hong Kong local capital and foreign capital.
Figure: monthly changes in the shareholding ratio of different intermediaries in Hong Kong stocks
In addition, in terms of policy, the Securities Regulatory Commission issued "China Securities Regulatory Commission issues five Capital Market Cooperation measures to Hong Kong" on April 19 to optimize the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism and broaden the flow channels of Hong Kong stocks. Later, the Hong Kong Monetary Authority released HK $525 million and HK $500m of liquidity to banks through the discount window on April 22nd and 23rd, respectively, injecting new vitality into the market. The positive introduction of the policy is expected to attract more mainland funds and institutional investors, and the marginal change of funds superimposed short covering has largely leveraged the Hong Kong stocks with relatively low turnover in the early stage. while improving the liquidity and stability of the market, it may bring more increments to the asset end of Hong Kong stocks, so as to get out of an accelerated market.
Finally, from the profit end, most of the annual reports of Hong Kong stocks have been disclosed in April, and the net profit and cash flow of many industries are eye-catching compared with the same period last year. With the improvement of the certainty of the fundamentals of Hong Kong stock performance, investors' risk appetite has also warmed up. The catalysis of large-scale buybacks and dividends by some Internet giants may consolidate the upward trend of Hong Kong stocks.
Lower range of valuation
Hong Kong stocks have outstanding performance-to-price advantages
Despite the recent strong performance of Hong Kong stocks, the Hang Seng Index has closed down for four consecutive years since 2020, with a maximum withdrawal of-52.75% almost halved, while the global mainstream capital market has not yet seen a record of falling for five years in a row. Hong Kong stocks may be in a more obvious state of overfall. (source: Wind, interval 2020-1-1-2024-5-3)
From a more intuitive valuation index, vertical comparison, the current Hang Seng Index, Hang Seng Technology Index price-to-earnings ratio of 9.41, 24.33 times, respectively, in the past decade 31.86%, 18.23% of the historical low quartile; horizontal comparison with the world's major indicators, the valuation depression attribute is also significant. Lower valuations not only provide a buffer against external fluctuations, but are also expected to further enhance the sensitivity of Hong Kong stocks to economic repair and policy signals.
Figure: price-to-earnings ratios of major global indices and their historical quantiles
In addition, due to the great differences in liquidity, risk preference, investor structure and dividend tax policy of AH shares, the pricing of the same company in different stock markets is not exactly the same. using the Hang Seng AH share premium index to measure the price difference between stocks listed in the mainland and Hong Kong at the same time, it can be found that the index has continued to rise in the past 10 years, and now it has exceeded 140. Relatively "cheap" Hong Kong stocks may provide investors with more cost-effective investment options.
Figure: hang Seng AH share premium index
Dealing with the "strong winds and waves" of Hong Kong stocks
Dumbbell strategy or both offensive and defensive
The continuous inflow of funds and large room for valuation repair have made many investors begin to re-examine the investment value of the Hong Kong stock market, but at a time when all kinds of "uncertainties" at home and abroad have intensified, blindly betting on a highly flexible track is still a riskier choice. a "dumbbell strategy" that takes into account both defensive and offensive ends or one of the ideal ways to allocate Hong Kong stocks.
As a decentralized investment allocation strategy, dumbbell strategy usually refers to the allocation of defensive assets related to economic weakness at the defensive end of assets, and the allocation of growth assets with strong flexibility at the offensive end. Although the idea of construction is simple, it has worked well in the volatile market in the past few years. And pay more and more attention to dividend repurchase and the gathering of technology leaders in the Hong Kong stock market, or dumbbell strategy can be more fully applied to the investment fertile ground. Specifically:
Defensive end: preferred Hong Kong stock high dividend plate
In the environment of low interest rate superimposed asset shortage, chasing high dividend assets with relative certainty may become the consensus of global capital. However, with coal, oil, non-ferrous and other traditional high-interest assets after a round of sharp rise generally pullback, A-share dividend style has also ushered in a certain adjustment recently. On the other hand, Hong Kong stocks, under the seesaw effect of growth and value, although the rise of the Internet, biotechnology and consumption has also led to the recent convergence of the relative performance of the high dividend sector, the range of pullback is relatively shallow under the support of AH share premium. or with a strong anti-fall attribute, short-term adjustment is expected to continue to open room for rebound. At the same time, compared with A-shares, Hong Kong stock dividend assets are undervalued, high dividend characteristics are significant, or the layout of high dividend assets should not be missed. As a long-term allocation of bottom assets at one end of the dumbbell strategy, it is expected to further consolidate the moat of risk aversion while achieving relatively stable high dividend returns.
At present, there are relatively few indexes focusing on the dividend strategy of Hong Kong stocks. The Hong Kong Stock Connect dividend (CNY) index is favored with a dividend yield of 7.78 per cent and a historically low price-to-earnings ratio of about 5.56 times (source: Wind, as of 24-5-3). In terms of industry composition, it is concentrated in the traditional pro-cyclical sectors with both low valuations and high dividends. The strong defense of the underlying index makes the Hong Kong stock dividend ETF (513530), which tracks the index, show strong resilience in the fluctuating Hong Kong stock market. By the end of the first quarter of 2024, the cumulative increase in the product since its inception (2022-4-8) has been as high as 11.31%, with an excess return of 12.90% over the performance benchmark for the same period. In 2023, when Hong Kong stocks fell unilaterally, they also made a return of 7.14%, while the Hang Seng index fell 13.82% and the benchmark performance fell 0.33% over the same period. (performance, performance benchmark data source fund periodic report, index data source wind, fund past performance does not predict its future performance, the performance of other funds managed by fund managers does not constitute a guarantee of fund performance, complete performance notes are at the end of the article)
Figure: performance of Hong Kong Stock dividend ETF range
The outstanding performance of the dividend strategy in the Hong Kong stock market has gradually enhanced the attractiveness of the allocation of Hong Kong Stock ETF (513530) and its linked funds (Class A 018387 and Category C 018388). On the other hand, from the perspective of investment cost, investing in Hong Kong stocks through QDII has the advantage of certain dividend tax rate, or it is a more cost-effective way to distribute high dividend assets. The growing investment demand of market funds has driven the Hong Kong Stock Exchange dividend ETF (513530) to grow its fund share by more than 98 per cent so far this year. (share data source: exchange, 114 million shares in 2023-12-31 and 226 million shares in 2024-4-30)
Offensive end: can focus on the main line of scientific and technological growth
At the other end of the "dumbbell", with greater upward flexibility and imagination of the Hong Kong stock technology sector or the current direction of income in the hearts of many investors. Scientific and technological innovation led by artificial intelligence has become an important driving force of industrial change, and domestic science and technology giants have launched "hundred model wars" one after another, which has greatly accelerated the development of AI in various industries. In the long run, the general direction of global scientific and technological development is relatively clear, and Hong Kong stocks with science and technology stars such as "high-tech, new business type, Internet" are expected to become an important position for China's scientific and technological innovation.
Among them, the Hang Seng Technology Index, as one of the iconic indices of Asia's high-tech industry, has the reputation of the Hong Kong version of "NASDAQ". The index covers 30 Hong Kong stocks in the fields of high-quality Internet services, software development and technology manufacturing, with both soft and hard technologies. In the current round of counter-offensive market dominated by Internet leaders, the Hang Seng Technology Index, which accounts for 78.8% of the IT ownership weight, took the lead in the outbreak. Hang Seng Technology ETF (513130), which includes Hong Kong stock high-quality technology leaders, has become one of the important options for fund-raising. Since August 2023, its share has repeatedly reached new highs, rapidly increasing from 18.86 billion to 33.219 billion. With the gradual deregulation of platform regulation and the implementation of the AI model of Hong Kong stock science and technology network, Hang Seng Technology ETF (513130) with leading and new economic attributes and its linked funds (Class A 015310 Category C 015311) are expected to show stronger growth flexibility. (share data source: exchange, interval 2023-8-1-2024-4-30)
Under the triple positive expectations of economic recovery, policy support and the inflection point of global liquidity, the Hong Kong stock market is showing a more positive investment prospect. While waiting for the internal and external situation to become clear, the high dividend assets of Hong Kong stocks with the advantage of high dividend undervaluation, such as Hong Kong Stock Exchange dividend ETF (513530) and its linked funds (Class A 018387 Category C 018388) as the main defensive allocation, while retaining a certain position layout Hong Kong stock technology theme ETF, such as Hang Seng Technology ETF (513130) and its linked funds (Class A 015310 Category C 015311) increase portfolio flexibility. The "dumbbell strategy" of "high dividend + high growth" or a better allocation combination for investors to capture the current structural opportunities in Hong Kong stocks.
Remarks: Huatai Berry Hong Kong Stock dividend ETF was established in 20220408. The earnings in 2022 and 2023 were 3.59% and 7.14% respectively. The performance comparison is based on the return of CSI Hong Kong Stock Exchange High dividend Investment Index, which is-4.15% and-0.33% respectively in the same period. Successive fund managers: Li Qian (20220408-present) and he Qi (20220408-present). Huatai Berry Hong Kong Stock Exchange Stock Exchange High dividend Investment Link Fund A & C was established in 20230619. At the end of 2023, the share returns of Class An and Class C funds were-2.61% and-2.73% respectively. The performance comparison was based on the yield of China Securities Hong Kong Stock Exchange High dividend Investment Index × 95% + the bank demand deposit interest rate (after tax) × 5%, and the income over the same period was-5.99%. Successive fund managers: Li Qian (20230619 to date). The above data are extracted from the periodic report of the Fund.
Risk Tip: if you need to buy relevant fund products, please pay attention to the relevant regulations on investor appropriateness management, do the risk assessment in advance, and buy the fund products that match the risk level according to your own risk tolerance. The past performance of the fund does not predict its future performance, and the performance of other funds managed by fund managers does not constitute a guarantee of fund performance. Please read the legal documents such as fund contract, fund prospectus and summary of product materials carefully before investment to understand the specific situation of the fund. The relevant funds in this paper can invest in the overseas securities market, and will also face special investment risks such as exchange rate risk, overseas securities market risk and so on. Other relevant indexes except Hang Seng Technology are compiled and calculated by China Securities Index Co., Ltd. ("CSI"), and its ownership belongs to CSC. CSC will take all necessary measures to ensure the accuracy of the index, but will not make any guarantee and will not be accountable to anyone for any errors in the index. The underlying index of Hang Seng Technology ETF is Hang Seng Technology Index, which is compiled and published by Hang Seng Index Company and is owned by Hang Seng Index Company. Hang Seng Index will take all necessary measures to ensure the accuracy of the index, but will not make any guarantee and will not be accountable to anyone for any errors in the index. (CIS)
