Source: Broker China
Author: Promise
As the Spring Festival approaches, Hong Kong stocks, which focus on consumption, have skyrocketed across the board.
Continued adjustments in the Hong Kong stock consumer circuit have attracted determined fundamental investors. The prerequisite may be both cheapness and short-term performance. Some fund managers believe that the recent replacement of popular AI technology on the consumer circuit in Hong Kong stocks largely reflects subtle changes in market risk appetite. After investors increasingly demand that performance and sufficiently attractive cheap stock prices be realized as soon as possible, the Hong Kong stock consumer circuit, which has an advantage in terms of key conditions, may become the main line in the near future.
Big consumption of Hong Kong stocks may become the main line
On February 6, Hong Kong consumer stocks rose across the board and became the core main line of the entire Hong Kong stock market. In the 7-day intraday,$YUM CHINA (09987.HK)$An increase of more than 15%,$HELENS (09869.HK)$An increase of more than 7%,$JIUMAOJIU (09922.HK)$An increase of more than 5%,$HAIDILAO (06862.HK)$An increase of more than 2%,$XIABUXIABU (00520.HK)$An increase of over 1%.
Unlike the 2023 Hong Kong stock market, which highlighted the main AI (artificial intelligence) line around the Spring Festival, consumption is becoming the most flexible in the current Hong Kong stock market. Industry insiders believe this may reflect the annual rotation characteristics of the industry sector. Previously, capital that placed emphasis on AI in the Hong Kong stock market is trending towards more attractive consumer stocks that have been abandoned by the market for a long time in the new year.
Some of the leading consumer stocks in the Hong Kong stock market actually began an astonishing independent market in the last month of 2023. A Chinese reporter from the brokerage firm noticed that the Hong Kong stock market leader in low-end cosmetics$CHICMAX (02145.HK)$In the 40 trading days since December 11 last year, its stock price has increased by an astonishing 95%. Statistics show that the leading products of Shangmei Co., Ltd. stand out in the Douyin sales channel due to their low price advantage, becoming Douyin Beauty's number one annual sales, surpassing the A-share cosmetics leader$Proya Cosmetics (603605.SH)$,$Yunnan Botanee Bio-Technology Group (300957.SZ)$As well as overseas$Estee Lauder (EL.US)$Wait for all the star brands.
Previously, Shangmei Co., Ltd. was regarded by some fund managers as a “beauty industry participant with no advantages or characteristics,” and since its listing, it has lacked public fund coverage. The sudden rise of unpopular types of funds in the eyes of this type of fund also largely reflects the market's preference for factors that exceed expectations.
A reporter from the brokerage firm China noticed that the cosmetics circuit of fund managers in the A-share market mainly covers Perea, Bethany,$Bloomage Biotechnology Corporation Limited (688363.SH)$As the leading stocks represented, almost all cosmetics stocks covered by public funds in the Hong Kong stock market are concentrated$GIANT BIOGENE (02367.HK)$As of the end of December 2023, there were more than 30 public fund products using Giazi Biotech as the core product. However, most of the public offering products from Shigekura Giant Biotech mentioned above were not profitable after being purchased.
Funds seek short-term results as safe haven
The reaction of the stock price trend of Hong Kong stock products to short-term results is becoming more severe. According to market participants, this change also caused the AI sector, which had a strong trend in 2023 but whose performance has not yet been released, to lag significantly behind in the recent performance of the Hong Kong stock market.
“The short-term recovery of consumer stock performance has certain advantages, but it may still be difficult for AI-related companies to release their performance.” A fund manager in South China believes that investors' prudence in stock selection has increased their focus on short-term results, and has also made varieties with short-term performance exceeding expectations the main investment line in market shocks, and varieties with long performance release cycles or even difficult to make profits may change in valuation logic.
Chen Hao, manager of E-Fangda Hong Kong Stock Connect Growth Fund, believes that the Hong Kong stock market is currently paying more attention to short-term performance. He believes that due to the current low risk appetite, short-term performance fluctuations have a big impact on stock prices, but more importantly, there are still imperfections in the preliminary research and follow-up process. Therefore, after careful consideration, holdings were reduced on individual stocks that may have had significant changes in investment logic, and individual stocks whose performance fluctuated only due to short-term economic effects, but had not changed in long-term competitiveness and core logic, were retained. It is hoped that active position adjustments will bring good absolute and relative returns to investors in 2024.
Cheapness is also a matter of course. At a time when cosmetics stocks such as Hong Kong stocks such as Shangmei Shares have become the darling of the market due to their impressive short-term performance, those that continue to lag behind the industry average due to their continued valuation$L'OCCITANE (00973.HK)$Hong Kong stocks also surged 15% in the intraday market. According to media reports, the Blackstone Group is considering bidding for the Hong Kong-owned skincare stock L'Occitane. People familiar with the matter said that the private stock company has been conducting initial due diligence while evaluating a potential takeover offer for L'Occitane. According to people familiar with the matter, the Blackstone Group is considering the possibility of cooperating with L'Occitane's billionaire chairman Reinold Geiger to acquire L'Occitane.
The consumer circuit may be more flexible
Regarding the layout of the Hong Kong stock market this year, most fund managers are pointing to more reliable consumer stocks.
China Southern Fund Shi Bo, which is on the Hong Kong stock consumer circuit, believes that the Hong Kong stock market is determined by a combination of China's macroeconomic fundamentals and global liquidity. Based on this framework, the Hong Kong stock market is not pessimistic: including that although the decline in interest rates on US bonds may have twists and turns, the general direction is basically determined. At the same time, expectations for future economic growth will be the key to influencing market trends. In December of last year, the Central Economic Work Conference stated that “active fiscal policies should be moderately strengthened to improve quality and efficiency,” and future fiscal expansion may become a key gripper for reversing the tight credit cycle and weak economic growth. Currently, US stocks already reflect the Fed's interest rate cut expectations to a large extent, while Hong Kong stocks are still in a valuation depression due to the weak mainland economy. The future may benefit from increased overseas capital allocation to emerging markets after interest rate cuts are implemented. Overall, the fund maintains the judgment that the Hong Kong stock market is volatile and upward.
Liu Guojiang, manager of Tianhong Hong Kong Stock Connect Select Fund, believes that although some consumer goods companies' terminals are not selling well, inventory has accumulated. According to the market's own understanding and expectations, the bottom of the fundamentals has not yet been fully established in the fourth quarter. In fact, the policy effort is almost uninterrupted. From the issuance of trillion treasury bonds to the relaxation of real estate policies in Beijing and Shanghai, these policies are all quite positive. Judging from the final trend of the market, the market is probably expecting more aggressive policies. High-quality development covers a wide range of topics, far more than just a few single goals such as economic growth. On the investment side. Overall, we still have stable ownership of excellent competitive companies. Combined with the current continued weakness in consumption power and the fact that some companies are facing certain operating pressure, positions have been reduced for companies with relatively full expectations, such as companies in the textile and garment, auto parts, and Internet industries. Currently, it mainly owns outstanding enterprises in the fields of Internet platforms, state-owned property management companies, food and beverage, financial platforms, textiles and clothing.
“We have seen many positive signs. For example, there are frequent policies to stabilize the mainland economy. At the same time, Hong Kong stocks, as an offshore market, have been adjusted for nearly 3 years, and investors are looking forward more to the restoration of domestic macroeconomic data and macroeconomic policies.” Zhang Dongyi, manager of the Guangfa Shanghai-Hong Kong-Shenzhen Select Fund, believes that more attention can be paid to the strength of fiscal policy in 2024. Currently, market expectations are that fiscal policy is mainly underpinned. The Hong Kong stock market, which has historically been sensitive to US bond yields, has performed weakly this time as US bond yields decline. Fiscal expansion is essential to boost the confidence of investors in the A-share and H-share markets, particularly the H-share market. In the current situation where real interest rates in the mainland are high and the fiscal deficit rate is low, we are still looking forward to more room for monetary and fiscal policies in the future.
Editor/Somer