(As of May 10 at 13:55)
Hong Kong stocks have recently led the global rise. Since April 22, the Hang Seng Technology Index ETF and Hang Seng Internet ETF have risen nearly 20%.
Hong Kong stocks continued to soar this week. As of 13:55, Guangfa Fund's Hong Kong Stock and Non-Bank ETF rose more than 10% this week, Huatai Berry Fund Hong Kong Stock Dividend ETF, Huaxia Fund Hong Kong Stock Connect Financial ETF, Huaxia Fund Hang Seng Dividend ETF, Huaxia Fund Hong Kong Stock Financial ETF, Huaxia Fund Hong Kong Stock Central Enterprise Dividend ETF, Huaxia Fund Hong Kong Stock Central Enterprise Dividend ETF, Huaxia Fund Hang Seng Biotech ETF, Yinhua Fund Hong Kong Stock Innovative Pharmaceutical ETF, and Bosch Fund Hang Seng High Dividend ETF rose more than 8%.
Yesterday, Hong Kong stocks were once again highly beneficial. According to Bloomberg news, China is reportedly considering reducing the 20% dividend tax that mainland individual investors need to pay when receiving dividends by investing in Hong Kong stocks, so as to avoid repeated taxation in the dry and port regions. People familiar with the matter said that the draft of the relevant plan has been reported to the relevant supervisory authorities, and there are still variables as to whether it will be finally implemented and the date of implementation.
CICC estimates that the total dividend tax collected by the Hong Kong Stock Connect mechanism is about HK$45 billion each year. Assuming that mainland individual investors account for about 1/4 of Hong Kong Stock Connect's investment, CICC expects the direct tax relief brought about by this potential adjustment to be around HK$10 billion each year. If public funds are included, the possible tax relief could be extended to around HK$20 billion.
On the capital side, mainland capital poured into Hong Kong stocks. According to the data, southbound capital crossed the Hong Kong River at an accelerated pace. In the first four months of this year, southbound capital flowed into the Hong Kong stock market by more than HK$210 billion, far higher than the same period in 2022 and 2023. In particular, the scale since March and April has all exceeded HK$80 billion.
Public funds are also increasing their holdings in Hong Kong stocks. According to Huaxi Securities statistics, as of Q1 2024, active equity public funds allocated 9.33% to Hong Kong stocks, up 0.62% from the previous quarter.
The shift in the systemic outflow of foreign capital to the Japanese stock market in the second half of last year put pressure on Hong Kong stocks. Recently, the focus of foreign capital allocation in the Asia-Pacific region has changed again from Japanese stocks to Hong Kong stocks, and the liquidity of Hong Kong stocks has greatly improved.
On Tuesday, the HSBC report indicated that sentiment in the Chinese market has improved, with lower valuations and favorable fund positions making risk/return more attractive than Japanese stocks.
HSBC pointed out, “The data shows that judging from fund positions, although the fund's overall holdings in Japan are still at a slightly low level, the allocation is already higher than the historical level. Exposure to China is gradually increasing due to favorable factors such as medium- and long-term undervaluation, and positive economic and market news. It is expected that the Chinese stock market will continue to be favored by capital in the short term, and the macroeconomic environment will continue to improve, or trigger a shift in capital from Japan to China.”
HSBC further stated that corporate profitability resilience and support policies are boosting sentiment in the Chinese market. With the return of foreign capital and domestic capital, signs of recovery in the real estate industry, undervaluation, favorable policies, and no major negative news will all increase the attractiveness of the Chinese market. At the same time, the Fed's interest rate hike cycle gradually ends and shifts to easing, and the Chinese stock market may outperform Japan in the future.