Source: Wall Street News
The Hang Seng Index hit a new year high, and the Hang Seng Technology Index rose 8.2% over the three days. In the first three days of this week, Meituan rose more than 17%, Tencent surged more than 12%, Kuaishou climbed more than 17%, Bilibili rose 14%, JD rose 13%, Alibaba climbed 8.5%, and Baidu surged more than 6%.
Hong Kong stocks have surged for three consecutive days since the Securities Regulatory Commission announced new cooperation measures with Hong Kong. Boosted by many positive news and generally optimistic expectations for the company's profits, technology stocks led the market today.
On Wednesday, April 24, the Hong Kong stock market once again opened high. The Hang Seng Index broke through and stabilized above 17,000 points. Together with the Hang Seng State-owned Enterprises Index, they hit a new closing high in nearly 5 months. Technology stocks collectively strengthened for the third day. The Hang Seng Technology Index rose sharply by 3.61%, rising 9% over three days.
Let's take a look specifically:
$MEITUAN-W (03690.HK)$It surged by more than 17% on the 3rd of this week, reaching a new high of HK$110 since November 23, 2023;
$TENCENT (00700.HK)$The three-day increase surged by more than 12% to HK$340, a record high in more than 9 months;
$KUAISHOU-W (01024.HK)$The three-day increase was more than 17%.$BILIBILI-W (09626.HK)$It increased 14% on the 3rd,$JD-SW (09618.HK)$The three-day increase reached 13%.$BABA-SW (09988.HK)$The three-day increase was 8.5%.$BIDU-SW (09888.HK)$Over 6% increase in three days;
The Hong Kong Stock Internet ETF rose 10.87% in three days.
Favorable policies+low valuation
From a policy perspective, the China Securities Regulatory Commission last week introduced 5 measures to support Hong Kong's capital market to support the performance of Hong Kong stocks, help improve the medium- to long-term liquidity of Hong Kong stocks, and provide incremental capital. Analysts at Guotai Junan Securities believe that the latest measures will continue to drive mainland capital inflows into Hong Kong, enhance their influence on the market, and help stabilize prices.
Guotai Jun An pointed out that since this year, the overall performance of the Chinese economy has remained stable. In particular, PMI and trade data since the beginning of the year were generally better than expected, which is beneficial to stabilizing investors' confidence to a certain extent. The China Securities Regulatory Commission announced five capital market cooperation measures with Hong Kong, which means that policy support for Hong Kong stocks is gradually increasing. Attracting more mainland capital and institutional investors for Hong Kong stocks in the future will be an important cornerstone for their development.
As of Wednesday, mainland investors have increased their holdings of Hong Kong stocks for 17 consecutive trading days, the longest continuous increase in history. Today, the net inflow of capital to the south continued, reaching HK$1,995 billion. Since April, the total inflow to the south has reached HK$39.158 billion. So far this year, with the exception of 11 trading days, mainland investors have increased their Hong Kong stock holdings on all trading days.
Second, the Hong Kong Monetary Authority is investing heavily in liquidity this week. On April 22 and 23, it will invest HK$525 million and HK$500 million in liquidity through discount windows, respectively. Since the beginning of this year, the Hong Kong Monetary Authority has used discount windows several times to inject liquidity into banks, with a cumulative amount of approximately HK$6.897 billion.
Some analysts have pointed out that the discount window is a standing Hong Kong dollar liquidity arrangement of the Hong Kong Monetary Authority to ensure the smooth operation of the interbank payment system. This move shows that the Hong Kong Monetary Authority is playing a positive role in maintaining the stability and liquidity of the financial market.
Judging from the valuation, the current expected price-earnings ratio of the Hang Seng Index corresponding to the end of 2024 is about 8.3 times. Compared with past history, it is still at a low valuation level. In a recently released report, UBS raised Hong Kong stocks to “overallocation” because Hong Kong stocks were supported by higher dividends, compounded by a recovery in the tourism industry.
According to the index-weighted EPS calculation method favored by UBS, the EPS of the MSCI China Index has declined by only about 2% over the past 18 months, outperforming other emerging markets (down about 8%). The largest constituent stocks in the China Index performed well overall in terms of profit and fundamentals.
The report also pointed out that UBS is now more optimistic about profits, given the initial signs of a recovery in consumption and the gradual flow of household savings to the market is strengthening.
Optimism about corporate profits is high
From the corporate side, according to news, Tencent officially announced that “Dungeons and Warriors: Origins” (DNF mobile game), which game fans have been waiting for many years, will officially launch on May 21.
Furthermore, the HK$100 billion share repurchase plan previously announced by the company is regarded as an important benefit. Huachuang Securities believes that this will effectively offset the financial pressure caused by shareholders' holdings reduction and have a positive impact on stock prices.
On April 10, Ma Yun, founder of Alibaba, published a post on the company's intranet entitled “Towards Reform and Innovation”. He highly affirmed the courage of change of the new management formed by Cai Chongxin and Wu Yongming, saying that Alibaba has returned to a healthy growth path and supports continued reforms. This is the first time in five years since his retirement that Ma Yun shared his thoughts on the company's reform, innovation and future prospects.
Furthermore, on February 7, Ali announced another increase in the share repurchase scale, increasing the total repurchase scale to 65 billion US dollars, which is the largest manual repurchase in the history of China Securities. Founders Ma Yun and Cai Chongxin also increased their holdings of Ali shares in the last quarter, highlighting their firm confidence in Ali's future development.
Shangtang Group released the latest version of the Sensenova generative AI model. According to Xu Li, chairman of the company, the new model has improved significantly in terms of language and creative ability, and has shown impressive performance compared to the world-renowned ChatGPT platform.
According to reports, many Hang Seng Index companies are expected to release their performance reports for the first quarter of 2024 by the end of May, and it is expected that profits may be the main driving factor for Hong Kong stocks in the next few weeks.
Specifically: On May 14, Tencent announced its quarterly report; on May 16, Baidu announced its quarterly report; and on May 22, Kuaishou announced its quarterly report.
Tai Hui, Hong Kong-based strategist at J.P. Morgan Asset Management, said,
“Investors' positions (previously) were very, very light, and their profit expectations were quite conservative.”
“I really think China's profit performance was good this year. So, the threshold for exceeding expectations is quite low, and this is exactly what people are concerned about.”
editor/tolk