As it turns out, the strongest players are never easily overtaken.

With the big tech giants in the US stock market making a big comeback last night, the AI concept, which had only been out for 2 days in the country, is booming again.

As of today's close, the AI sector ushered in a strong market of 20CM for 3 stocks and 10CM+ for over 20 stocks.

However, the overall stronger performance still depends on Hong Kong stocks.

Over the past three days, the Hang Seng Index has accumulated a cumulative increase of more than 6%, and the Hang Seng Technology Index surged more than 9%, leaving Big A far behind.

Among them, many tech giants, such as Shang Tang, Kuaishou, Meituan, Li Ning, and Bilibili, all rose by more than 15% during this period, and even stock king Tencent rose 13%.

Obviously, there must have been a major event behind this, leading to a major logical shift in Hong Kong stocks.

01

In early trading today, Hong Kong stock AI model giant Shangtang Technology announced a temporary suspension of trading after surging 31% in the intraday session.

According to reports, the “Japan-Japan New Big Model 5.0” released by Shang Tang last night can fully benchmark GPT-4 Turbo and meet or surpass GPT-4 Turbo in mainstream objective evaluations. This press conference attracted great attention from the market.

Meanwhile, a number of AI giants in the US stock market began to rise again last night, which originally stimulated China Securities to continue to strengthen. Shang Tang's appearance ignited the trading sentiment of the A Hong Kong Stock and AI concept sectors in both places.

In fact, the AI trend has never stopped surging. Although the tech giants in the US stock market were shocked and sweaty the day before yesterday by the horrible collapse of ultra-microcomputers, in reality, the sharp decline in the sector itself did not have much to do with their performance growth logic.

The domestic AI industry chain is the same. With the disclosure of financial reports for the first quarter, the performance of giants in some industrial chains, such as CPO, computing power, and AIGC, showed a marked increase, indicating that the logic of the domestic AI industry chain is also emboldened.

However, this wave of market in Hong Kong stocks is clearly not limited to AI, but also the Internet, pharmaceuticals, energy, and consumer sectors, which have all ushered in a very drastic “correction.”

For example, Kuaishou, Meituan, and Li Ning, which have risen by about 20% in 3 days. They are in the video, e-commerce, and consumer sectors, as well as a number of biomedical giants that have increased quite a bit.

The main reason for this situation is that the Hong Kong stock market itself has experienced significant benefits.

02

Last week, the China Securities Regulatory Commission announced 5 capital market cooperation measures with Hong Kong. including:

The first is to relax the scope of eligible products for stock ETFs under the Shanghai-Shenzhen-Hong Kong Stock Connect.

The second is to include REITs in the Shanghai-Shenzhen-Hong Kong Stock Connect.

The third is to support the inclusion of RMB stock trading counters in Hong Kong Stock Connect.

The fourth is to optimize mutual recognition arrangements for funds.

The fifth is to support leading enterprises in the mainland industry to go public in Hong Kong.

These five major initiatives are another major breakthrough in the exploration of capital market connectivity between the two places, and can be called a very targeted major benefit.

For example, in section 1, the market entry threshold for ETF products is relaxed. After optimization and implementation, the number and scale of the Shanghai-Shenzhen-Hong Kong Stock Connect ETF targets will increase significantly. This means that when ETF product standards are relaxed, there will be more target products, and the capital that will follow will definitely increase as a result.

Also, supporting the inclusion of RMB stock trading counters in the Hong Kong Stock Connect will also make it easier for mainland investors to participate in the Hong Kong stock market.

Basically, great optimization has been carried out in terms of both investment channels and variety selection.

Optimizing mutual recognition of funds between the two places allows institutions to issue more fund products to invest in Hong Kong stocks. Ultimately, it is also an effective way to increase the scale of institutional allocation to Hong Kong stocks.

As the water rises, the increase in liquidity will inevitably bring strong support to stock prices. Everyone understands this logic, so now, taking advantage of the measures that have not yet been implemented, the market capital is entering the market layout ahead of schedule.

Therefore, after the Securities Regulatory Commission announced this major benefit last Friday, Hong Kong stocks immediately began to rise sharply across the board.

Moreover, for three days in a row, not only has trading sentiment not stopped, but it has also intensified, from piloting high-yield stocks in the beginning, to the technology circuit, to mainstream sectors such as pharmaceuticals and consumption.

This shows that the market is now very much in agreement with this underlying logic.

There is another major positive stimulus for Hong Kong stocks.

Recently, several international investment banks have also updated their views on Chinese stocks:

In its latest report, UBS is optimistic about mainland A shares and Hong Kong stocks. In response to improvements in corporate profits, UBS raised its investment rating to increase its holdings.

Morgan Stanley believes that global capital is returning to the Chinese stock market. As the bearish sentiment of some funds on the Chinese market eased, the withdrawal of long-term global investors from A-shares and Hong Kong stocks has been suspended.

Goldman Sachs analysts also bluntly stated in the latest report that China's capital market reforms will bring huge potential revaluation benefits, saying that if A-shares can reduce or catch up with the international average in terms of shareholder returns, corporate governance, and institutional investor shareholding, the room for revaluation can reach up to 40%. Although Hong Kong stocks were not specified at the same time, the two markets are inherently in the same vein, which is also considered to be optimistic about the Hong Kong stock market in disguise.

03

Compared to A-shares, there are actually too many good things in Hong Kong stocks; it's just because liquidity is so poor that they haven't been able to get a reasonable valuation premium.

There are many popular concept tracks in Hong Kong stocks, and there are many excellent industry chain leaders, and they can only be bought in Hong Kong stocks and US stocks. For example, in AI, the Internet, and some consumer sectors, mainland investors want to invest in the real core domestic market; they can only buy Hong Kong stocks or Chinese securities.

But on the other hand, many of the leaders in these excellent sectors have always had an overall valuation level that is seriously lower than that of A-shares.

Most internet giants such as Tencent, Ali, Xiaomi, and JD are only 10 or 20 times more valued. If placed in A-shares, the valuation premium can be raised at least one level higher.

Previously, most domestic investors wanted Hong Kong to be envious, or bought some through the Hong Kong Stock Connect channel, but not to mention the relatively complicated process and eligibility restrictions, there was sometimes no way to be satisfied with the range of options.

Now, under the five major measures, these problems have been further strongly improved, which is undoubtedly a win-win situation for mainland investors and the Hong Kong stock market.

With so much money going south, what will they buy?

It's definitely either a popular racetrack, such as AI or the Internet;

Either it is an industry with promising expectations, such as pharmaceuticals or traditional consumer leaders;

Either it's traditional industries with high dividends and long-term steady performance, such as big finance and energy (three barrels of oil, non-ferrous coal, etc.).

This logic is also the current configuration idea of the agencies.

According to the first-quarter fund report for investing in foreign stocks, in addition to foreign technology giants such as Microsoft, Nvidia, META, Amazon, Broadcom, and Google, Meituan, Kuaishou, and Tencent also received significant increases in their positions in the TOP20.

According to reports from fund bosses, in addition to AI and the Internet, healthcare and consumption are also areas that are clearly favored.

Qiu Dongrong, manager of a 10-billion fund, believes that the current Hong Kong pharmaceutical technology stock pattern is becoming more and more clear. The market value of some 18A biotech companies is already lower than net cash, and PE value is at the bottom of history. Whether from a company or product perspective, they have a good return on investment.

Of course, there is also a lot of capital coming from excellent industry leaders with high dividends and undervalued Hong Kong stocks.

For example, A+H bank stocks and resource stocks listed in the two places originally had a very low valuation on A shares, but the valuation of A shares and H shares still has a very obvious premium rate.

This means that if you buy the same stock, you can get a huge discount on H shares, then the return on dividends will be higher. For example:

CCB's latest dividend rate for H shares is 8.56%, but its A-share dividend ratio is 5.37%;

CNOOC's latest dividend rate for H shares is 14.07%, but its A-share dividend ratio is 4.25%;

The latest dividend rate for Ping An H share of China is 8.06%, but its A-share dividend ratio is 6%;

The latest dividend rate for China Shenhua H shares is 9.18%, but its A-share dividend ratio is 6.4%;

...

Basically, they all have dividend rate differences of more than 2 points, and some are even larger, which is enough to make the capital feel excited.

It can be expected that in the future, after the two places have optimized connectivity to a greater extent, the southbound trade will become more and more convenient, so there will inevitably be more capital to choose to allocate these high dividend notes southward, thus bringing considerable liquidity to the latter, thereby raising their valuation level.

This trend now seems to have begun.

Over the past few days, many A+H shares have experienced a situation where A shares are falling while H shares are rising. This is probably the reason why capital has actually begun to participate.

04

Overall, under the combined effects of major domestic policy reforms and emerging markets gradually receiving capital inflows, the probability that the Hong Kong stock market has been undervalued for a long time due to serious lack of liquidity, is gradually increasing.

At the same time, a large number of domestic key players in popular circuits such as AI, the Internet, healthcare, and consumption are concentrated in the Hong Kong stock market. If they are optimistic about these fields, investors might as well pay more attention next. (End of full text)