Is the Hong Kong stock market that has rebounded for days coming to an end?

On Wednesday, December 7, Hong Kong stocks fell back high and dived in late trading. The Hang Seng Index closed down 3.22% after rising more than 1% at one point, while the Hang Seng Technology Index fell 3.77% after rising nearly 4%. Affected by the continued optimization of epidemic prevention and control, pharmaceutical stocks are strong, Shandong Xinhua Pharmaceutical rose more than 28%, film concept stocks, gambling stocks rose, aviation stocks broke out collectively, China Eastern Airlines Corp Ltd rose more than 6%, but recently the more powerful inner housing stocks fell across the board. Longguang Group fell about 16%, Country Garden Holdings fell about 15%.

The concussion and correction of Hong Kong stocks in the past two days has made many investors worry that the Hong Kong stock market, which has just picked up, is going to "fade" again. However, institutions are relatively optimistic about the future of Hong Kong stocks. Societe Generale Securities said that Hong Kong stocks have experienced the coldest winter in the past two years and will witness the return of spring in 2023.

In fact, in terms of real money and silver, undervalued Hong Kong stocks are attracting three major capital inflows. First, foreign investors accurately copied the bottom, and recently, the details of increasing the positions of many foreign-funded institutions have been exposed; second, the repurchase funds are still increasing their holdings, with the total repurchase amount reaching 92.8 billion Hong Kong dollars during the year; third, the Hong Kong Stock Connect ETF trading is active, and the net inflow of capital continues to increase.

Accurate bottoming of foreign investment

The Hang Seng technology index has rebounded more than 50 per cent since its low, with technology stocks such as Tencent, BABA-SW and Meituan-W all up more than 30 per cent.

Behind the big rebound in Hong Kong stocks is the collective "sweep" of foreign-funded institutions.

According to the latest disclosure documents of the Hong Kong Stock Exchange, November 30JPMorgan Chase & CoBuy 1.0077 million shares of CANSINOBIO at an average price of HK $100.1743 per share, increasing its shareholding from 7.49 per cent to 8.25 per cent; JPMorgan Chase & Co bought 1.209 million H shares of Bilibili Inc., increasing its shareholding from 10.79 per cent to 11.17 per cent.

On the same dayBlackrockIncreased holdings of 205.74 million shares of Agricultural Bank Of China, each priced at HK $2.598, with a total amount of about HK $535 million. After the increase, the latest number of shares is about 2.31 billion shares, and the latest proportion of shares is 7.52%. Blackrock increased his stake in PICC Property and Casualty 37.166 million shares at a price of HK $7.846 per share, with a total amount of about HK $292 million, and the latest number of shares after the increase is about 439 million shares. the latest shareholding ratio is 6.36%. Blackrock increased his stake in 2.9082 million shares of ZTE Corporation (00763.HK) at HK $16.7002 each, for a total amount of about HK $48.5675 million. After the increase, the latest number of shares is about 76.7059 million shares, and the latest shareholding ratio is 10.15%.

Goldman Sachs Group GroupIt is also increasing its holdings. Data show that Goldman Sachs Group Group increased its stake in CANSINOBIO by 627000 shares at a price of HK $99.4869 each, with a total amount of about HK $62.3783 million. After the increase, the latest number of shares is about 6.7755 million shares, and the latest shareholding ratio is 5.11%.

In fact, foreign institutions have bought Hong Kong stocks many times since November. For example, JPMorgan Chase & Co has spent nearly HK $4 billion in the past month to increase his holdings of Hong Kong stocks, including Ping An Insurance, HKEx, Zai Lab Limited, Wuxi Apptec, Li Auto Inc., XPeng Inc. and Bilibili Inc.. The share prices of these companies have rebounded significantly recently.

News such as the loosening of domestic epidemic control policies, the shift in real estate policy and the possible end of global interest rate hikes have contributed to the continuous improvement in market expectations, which once again ushered in an excellent allocation window for Hong Kong stocks as assets for global liquidity allocation. Foreign institutions are buying heavily at the bottom of Hong Kong stocks, which can be described as an accurate bottom.

The repurchase funds are still increasing their holdings.

For the whole year, the Hang Seng Index is still down about 20% so far this year, falling for three consecutive years, while the Hang Seng Technology Index is still down about 29% this year, and the share prices of many weighted stocks have fallen sharply.

Hong Kong stock prices continue to fall, and Hong Kong stock valuations are still at historically low levels. This year, Hong Kong stocks have launched a buyback storm, boosting confidence. A number of Hong Kong companies, such as Tencent, Weichai Power, AIA Group Limited and Great Wall Motor, have announced big buybacks.

Recently, the emotional side of Hong Kong stocks has rebounded sharply, rebounding by a lot, but the enthusiasm of Hong Kong stock companies to buy back has not diminished.

Tencent announced on December 7 that it would buy back 1.13 million shares at a price of HK $299.8 to HK $315.6, at a total cost of about HK $351 million. The day before, Tencent said to buy back 934400 shares at a repurchase price of HK $307.6 to HK $310.2, at a total cost of about HK $289 million.

AIA Group Limited said on the 6th that he would buy back 1.9612 million shares at a price of HK $81.80-HK $83.60, at a total cost of about HK $163 million. China Petroleum & Chemical Corporation spent about HK $49.223 million to buy back 13.332 million H shares at a price of HK $3.64-HK $3.75. CK Asset spent about HK $24.0903 million to buy back 530000 shares at a price of HK $45.35-HK $45.60 per share.

As of December 7, 223 Hong Kong stock companies had implemented buybacks, with a total repurchase amount of 92.8 billion Hong Kong dollars (about 83 billion yuan). Among them, Tencent's total buyback amount this year exceeded 28 billion Hong Kong dollars, and AIA Group Limited's total repurchase amount this year exceeded 24 billion Hong Kong dollars.

The number and amount of Hong Kong stock buybacks reached an all-time high, with the total repurchase amount in 2022 being 2.4 times that of HK $38.068 billion in 2021.

Societe Generale Securities said that Hong Kong share buybacks in September and October 2022 were the highest and second highest since 2008, indicating the confidence of listed companies.

Hong Kong Stock Connect ETF trading is active

In addition to the return of foreign capital and large-scale buybacks of Hong Kong stock companies, the stabilization of Hong Kong stocks is also inseparable from the support of domestic funds.

Domestic funds mainly flow into Hong Kong stocks through the Hong Kong Stock Connect. Since mid-late October, southbound capital inflows into Hong Kong stocks have increased significantly, and the proportion of Hong Kong shares held by major Internet companies has increased.

Since the end of 2021, southbound capital has continued to flow into Hong Kong stocks for 13 consecutive months, with a total of HK $379.1 billion southward for the whole of 2022.

From the perspective of the size of the Hong Kong Stock Connect ETF, the scale of more than 60 Hong Kong Stock Connect ETF has grown during the year, and only 2 ETF have shrunk. The latest scale of Internet ETF and Hang Seng Internet ETF is as high as 37.4 billion yuan and 24.9 billion yuan, while the Hang Seng Technology Index ETF, Hang Seng ETF and Hang Seng Technology ETF all exceed the 10 billion yuan mark. Hong Kong Stock Exchange ETF has become an important part of the ETF market.

The recent rebound in Hong Kong stocks promotes the active trading of Hong Kong Stock Connect ETF.

For example, on December 6, the daily turnover of Hang Seng Internet ETF and Hang Seng Technology Index ETF exceeded 3 billion yuan, making it the largest ETF in the equity ETF market. In addition, the daily turnover of China Interconnection ETF, Hang Seng Technology ETF and Hang Seng Medical ETF all exceeded 2 billion yuan. While the transaction volume was enlarged, the turnover rate of Hong Kong Stock Connect ETF also continued to soar, with Hang Seng New economy, Hong Kong Stock Exchange dividend ETF, Hong Kong Stock Connect Consumer ETF and Hong Kong Stock Connect Pharmaceutical ETF all exceeding 100%.

Institutions: the repressive factors of Hong Kong stocks are gradually alleviating.

With more and more funds pouring into Hong Kong stocks, the current repressive factors of Hong Kong stocks are gradually alleviating. From a trading point of view, the market's pessimistic expectations for industry uncertainty have improved, and the overall valuation of the sector has gone out of the bottom range.

Guotai Junan predicts that the expected return of the Hong Kong Hang Seng Index will be 36.6% in 2023, or ahead of other major stock indexes in the world. At the same time, he also expects the performance of Hong Kong listed companies to bottom out in 2023.

CITIC said that the policy is expected to reverse, foreign capital is expected to continue to return to Hong Kong stocks, in addition, Hong Kong stocks are expected to gradually usher in a dual repair of valuation and performance from the second quarter of 2023.

Societe Generale Securities said that Hong Kong stocks have experienced the coldest winter in the past two years and will see the return of spring in 2023. In 2023, Hong Kong stocks will usher in a long window period of China's opening up, economic recovery and falling interest rates on US long-term bonds. The specific promising industries are: the Internet and Xinchuang industrial chain will benefit from the improvement of Internet policies and digital economic stimulus policies; the leaders of value stocks such as real estate, oil tankers, energy and finance will benefit from economic recovery and the construction of valuation systems with Chinese characteristics, and high-quality state-owned enterprises and Hong Kong stocks in traditional industries are expected to be revalued in 2023; the structural market of consumption and services will benefit from the optimization of epidemic prevention and control policies and consumer recovery. Advanced manufacturing-automotive industry chain, new energy, biomedicine, science and technology hardware and so on.

However, Societe Generale Securities also warned that it is still necessary to beware of the "late spring cold" in spring. Hong Kong stocks are not a vigorous bull market in 2023, and the market is still volatile. On the one hand, be wary of the longer-than-expected continuation of the Fed's rate-raising cycle, which will lead to a recession in the United States in 2023 and have a negative impact on the global economy and overseas stock markets. On the other hand, China's economic recovery may not be achieved overnight, especially the impact of the epidemic in the first half of the year and the tight pace of epidemic prevention and control policies are still uncertain, which may lead to twists and turns in the A-share and Hong Kong stock market; in addition, the way and means of economic policy and the direction of industry all have an impact on the market style.