Source: Wind

On April 30, after rising for 6 consecutive trading days, the Hang Seng Index rose slightly by 0.23% on the day of press release. It is worth mentioning that Hong Kong stocks maintained a volatile trend in early to mid-April, and there was a strong rebound in late April. Since April 22, the Hang Seng Index has accumulated an increase of 8.8% on the 5th.

The recent upward momentum of Hong Kong stocks is strong

Overall, compared to the performance of US stocks, A shares, and Hong Kong stocks, Ping An Securities said that although Hong Kong stocks had the smallest increase since the beginning of the year, they had the strongest upward momentum. Looking at the fundamentals of performance, although the performance of various industries in the 2023 Hong Kong stock report is uneven, the year-on-year ratio of net profit and cash flow to most industries is positive, and there is still some support in the fundamentals of Hong Kong stock performance.

Looking at domestic macroeconomics, on April 30, data from the National Bureau of Statistics showed that in April, China's manufacturing PMI was 50.4%, in the expansion range for two consecutive months, and the manufacturing industry continued to recover; in April, the non-manufacturing business activity index was 51.2%, still above the critical point, and the non-manufacturing industry continued to expand; in April, the composite PMI output index was 51.7%, down 1.0 percentage point from the previous month, indicating that the expansion of production and operation activities of Chinese enterprises has slowed down. Furthermore, according to data released by the National Bureau of Statistics on April 27, industrial enterprises above the national scale achieved a total profit of 1505.53 billion yuan in January-March, an increase of 4.3% over the previous year. Overall, the profits of industrial enterprises maintained a growth trend in the first quarter.

Furthermore, it is worth noting that the latest report from the International Finance Association (IIF) shows that in March 2024, net purchases of Chinese stocks and bonds by foreign capital reached 1.7 billion US dollars and 2.1 billion US dollars, respectively. This is the first time since June last year that Chinese stocks and bonds have received net purchases from foreign investors at the same time.

Still at the bottom of the valuation, the configuration window has arrived

Looking at the current outlook PE in the Hong Kong stock market, the Tianfeng Securities Research Report shows that as of April 26, the Hang Seng Index's 12-month outlook PE had a historical quantile value of about 15% since 2019; the Hang Seng Index's equity risk premium was 0.2 standard deviations below the historical median of 0.2 standard deviations from the historical median, at a historical quantile of about 26%. At the same time, the valuations of some leading companies in the Internet sector that weigh Hong Kong stocks are at historically low levels. Currently, Tencent, Ali, Meituan, and Kuaishou Forward-Looking PE are 16.2, 8.7, 13.4, and 7.4 respectively. The valuations are still significantly lower than leading US stocks, and the core assets are relatively cost-effective.

As for the reason behind the recent rise in Hong Kong stocks, Ping An Securities believes that the core driving force comes from financial improvements. At the same time, active introduction of policies to help the development of Hong Kong stocks and the fundamentals of Hong Kong stock performance are supported. Looking back, since capital inflows into Hong Kong stocks in this round may be mainly transactional capital, the purpose of hedging and trading is stronger, mainly to avoid the risk of a recent pullback in US stocks and Japanese stocks. Whether the inflow continues in the future depends on the easing of external pressure. On the other hand, domestic momentum still needs to be further restored. Overall, the financial aspects of Hong Kong stocks have improved and policies have been actively introduced. Combined, Hong Kong stocks are still at the bottom of the valuation. The agency believes that the allocation window for Hong Kong stocks has reached. On the sector side, focus on the three main lines of dividends+going overseas and the internet.

Tianfeng Securities suggests focusing on subsequent inflows of foreign capital, as well as the growth value and revaluation opportunities of Internet platforms, new consumption, and new power targets.

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