Today's Hong Kong stocks have reversed their decline and launched a major counterattack.

The three major indices took off strongly. The Hang Seng Technology Index once surged more than 4%, but now it has rushed back to 2.62%. The Hang Seng Index has risen more than 1%, and the State-owned Enterprises Index has risen 1.6%.

Technology stocks across the board boosted the market. At one point, Bilibili surged more than 9%, Meituan rose more than 8%, JD rose more than 7%, and Baidu, Tencent, Ali, and Xiaomi all rose.

Home appliance stocks and new car builders are showing impressive gains. Semiconductor stocks, which had previously been falling continuously, have also experienced a rebound, and restaurants stocks, Apple concept stocks, petroleum stocks, and gold stocks have risen one after another. Conversely, the performance of concept stocks such as domestic bank stocks and heavy infrastructure stocks declined.

Currently, net purchases from Southbound Capital exceed HK$3.6 billion, of which net purchases from Hong Kong Stock Connect and over HK$2.2 billion from Shanghai Stock Connect and over HK$1.4 billion in net purchases from Hong Kong Stock Connect.

Today's big explosion may be sparked by “small essays” in the market.

According to some sources, the central bank may end up buying debt, and the “Chinese version of QE” is about to begin. Some market participants believe that this means that the central bank will expand its statements, curb passive credit contraction, and benefit the treasury bond market.

What other factors influence?

The strong return of large technology stocks also had a big impact on their performance and the popularity of foreign investment banks.

Recently, according to the financial report released by Bilibili, the total revenue of Station B reached RMB 22.53 billion in 2023, of which total revenue for the fourth quarter reached 6.35 billion yuan. The gross margin increased to 26.1% for 6 consecutive quarters, and the adjusted net loss narrowed sharply by 58% year on year.

Up to now, the 2023 results of Internet leaders such as Tencent, Meituan, Kuaishou, and Xiaomi have all been released.

Judging from the “report card,” Meituan turned losses into Yingda's profit of more than 10 billion yuan and reached a record high; Xiaomi doubled its profits, and Tencent Holdings and Bilibili both achieved growth of more than 30%.

With the outstanding performance of major internet companies, foreign investment banks have also begun to sing for leading companies.

Yesterday, international rating agency Moody's raised Meituan's credit outlook to “positive” and confirmed the company's Baa3 rating.

Moody's predicts that Meituan's adjusted EBITDA margin will gradually increase to 10% over the next 12 to 18 months, while annual revenue growth will slow to 10% to 15% over the next two to three years.

In addition to Moody's, well-known investment banks such as J.P. Morgan Chase, Morgan Stanley, and Macquarie have all recently raised Meituan's target prices.

Macquarie raised its target price by 11% to HK$118 and reaffirmed its “outperforming the market” rating;
J.P. Morgan Chase raised the rating from “neutral” to “increased holdings”, and the target price was raised substantially from HK$67 to HK$110;
Morgan Stanley also gave it a “in sync with the market” rating, and the target price was raised from HK$85 to HK$100.

As the results came out, Anta was also sung a lot by investment banks.

Internationally renowned investment banks such as J.P. Morgan Chase, Morgan Stanley, and Nomura have also recently raised Anta's target prices.

J.P. Morgan maintained Anta's “gain” rating, and the target price was raised from HK$140 to HK$144;
Morgan Stanley maintained its “Overweight” rating, and the target price was raised from HK$111 to HK$117;
Nomura also maintained a “buy” rating, and the target price was raised from HK$123.1 to HK$125.1.

In fact, since March, foreign investors have been intensively vocal about the Chinese market.

Earlier, HSBC released a report stating that currently there are 6 major positive factors that can attract more foreign investment into the Chinese market, including: 1) undervaluation; 2) overseas funds' holdings in the mainland China market are still low. Among them, the foreign investment participation rate for A-shares was 3.1% in February 2024, which is relatively low; 3) improved economic relations between China and the US; 4) policy incentives; 5) the resilience of the RMB; and 6) strong circulation data after the switch.

The wave of buybacks is raging

There is a new wave of Hong Kong stock repurchases. Internet giants are clearly the main force in this round of buybacks.

According to statistics, yesterday (March 27), 37 Hong Kong listed companies made share repurchases, totaling 52.5977 million shares, with a repurchase amount of HK$1,724 million.

Among them, Tencent, which had the largest repurchase amount, spent HK$1.02 billion to repurchase 3.29 million shares. Since this year, Tencent has repurchased 16 times, with a total repurchase amount of HK$13.832 billion.

Earlier, Tencent announced that the repurchase scale will at least double in 2024, from HK$49 billion in 2023 to over HK$100 billion in 2024, while the 100 billion repurchase plan is expected to offset the financial pressure on shareholders to reduce their holdings.

With the exception of Tencent Holdings, companies such as Meituan, Kuaishou, and Xiaomi Group all had repurchases of over HK$1 billion.

Alibaba also announced the latest progress of the repurchase plan. The company's board of directors has approved an increase of 25 billion US dollars in the share repurchase plan, which is valid until the end of March 2027.

After the scale adjustment, Ali Group will still have a share repurchase quota of US$35.3 billion for the next three fiscal years.

According to Wind data, as of March 27, 123 Hong Kong stock companies had made repurchases during the year, with a total number of repurchases of 2,173 billion shares, with a total repurchase amount of HK$45.737 billion, an increase of more than 2 times over the same period last year.

Market sources said that recently, the scale of repurchases of Hong Kong stock listed companies is increasing, mainly because the company believes that their valuations continue to be undervalued by the market. The net market ratio of the Hang Seng Index is near its lowest level ever.

Haitong Securities pointed out that for the Hong Kong stock Internet sector, the domestic economy, the Federal Reserve's interest rate hike, etc. are still the current core macro-variables. It is expected that with subsequent economic improvements, optimization of the competitive landscape, and the continued release of cost reduction and efficiency, the revenue and profit side of various companies are expected to gradually pick up, and a new round of industrial revolution brought about by superimposed AI is expected to spawn new growth points. Furthermore, Internet companies continue to increase repurchases, demonstrating market confidence.

In terms of the allocation of Hong Kong stocks, Tianfeng pointed out that in a context where economic data continues to be verified and the pressure to depreciate the Hong Kong dollar has not yet been relieved, the proposal is still mainly based on a high dividend strategy.

Sectors such as utilities, energy, finance, and telecommunications, which have high dividend rates in the short term, can provide considerable relative returns in this environment even if market volatility increases in the future; in the medium to long term, the technology industry represented by semiconductors and the Internet will still be the main gripper for industrial transformation and is expected to benefit from government support and domestic substitution.

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