ITC Financial News APP learned that Huatai Securities issued a research report stating that the liquidity of Hong Kong stocks has weakened recently. Huatai Securities believes that the main features under the circumstances of election trading "heating up" and rate cut trading "cooling down" are the outflow of configured foreign capital and the rise in short positions: 1) both active and passive foreign investment have weakened, and the net outflow of trading volume has narrowed; 2) the short position of Hang Seng Index has risen to 18.0%, and on Friday, it increased by more than 20%, which is above the mean 1 standard deviation since 2021. 3) Repurchase amount and market value have fallen but remain at a high level; 4) the southward direction is the main resilient item, and the premium of A + H is approaching the upper limit of the reasonable range, and the net inflow of southbound direction is expanding. In addition, since 7.22, under the new policy of Shanghai, Shenzhen and Hong Kong Stock Connect, six new ETFs have been officially included in the Hong Kong stock exchange. With reference to the experience of the first batch of interconnection ETFs, the trading volume is expected to increase after inclusion.

Here are the main points of HuaTai Securities:

Trends of foreign capital: Both active and passive investments have weakened, and the net outflow of trading volume has narrowed.

From 7.11-7.17, the net outflow scale of the configured foreign capital, as calculated by EPFR, expanded, with the net inflow of ADR expanding and the net outflow of Hong Kong stocks expanding. The net outflow of active foreign capital expanded to $0.371 billion (compared to a net outflow of $0.26 billion in the previous week), and the net inflow of passive foreign capital slightly decreased to $0.138 billion (compared to a net inflow of $0.154 billion in the previous week); as for the trading volume, the net outflow of trading foreign capital, which was estimated by the bank, shrank to $0.048 billion (compared to a net outflow of $2.607 billion in the previous week). The expectation for rate cuts has contributed to the rising investor sentiment. However, it should be noted that: 1) rate cut trading may shift from the starting point to the slope, and the current rate cut path still has uncertainties; 2) the previous "swing" trading may have already been used to calculate some rate cut expectations, and after the short-term bullish period, we need to wait for more catalysts.

Southbound capital: The premium of A + H is approaching the upper limit of the reasonable range, and the net inflow of southbound direction is expanding.

As of the week ending 7.19, southbound capital had a net inflow of 17.65 billion yuan, an increase of 10.89 billion yuan from the previous week. As of the close on 7.22, the premium of A + H rebounded to 147.7. The bank estimates that, excluding the impact of dividend tax relief policies, the reasonable fluctuation range within the year is about 142-148. The 148 point implies the expectation of the US dollar index above 105 + the YoY -20% expectation of real estate sales. The current A + H premium may have already fully accounted for the expected disturbance. In terms of industry, net inflows of southbound capital are led by banks, media, electronics, non-banking, and textiles and clothing, while net outflows are led by automobiles and petrochemicals. In terms of individual stocks, those with the highest net inflows include China Construction Bank, Industrial and Commercial Bank of China and China Mobile; those with the highest net outflows include Tencent Holdings and HSBC Holdings. Southbound dumbbell-type allocation advantages focus on red chips and the new economy, and internal differentiation of red chips intensifies, with net inflows of large finance and public utilities and net outflows of resource products.

Industry capital: The enthusiasm for repurchase has cooled down somewhat but remains at a high level.

Last week, repurchasing enthusiasm in Hong Kong stocks increased and remained at a relatively high level: there were 255 repurchase cases last week, 12 fewer than the previous week, and the repurchase amount was HKD 4.81 billion, a decrease of HKD 5.33 billion from the previous week. The market value of repurchase has fallen to one-thousandth of 0.89 since 2010. By industry, 1) in terms of repurchase amount, retail trade, banks, insurance and other industries have the highest repurchase amount, with software and services, retail trade, insurance and banks seeing an increase in repurchase amount compared to the previous month; 2) with regard to the market value ratio of repurchase, retail trade, technology hardware and equipment, insurance, consumer services and banks have the highest market value ratio of repurchase. Among individual stocks, the top 10 stocks in terms of repurchase amount are Meituan-W, HSBC Holdings, AIA Insurance, Xiaomi-W, Kuaishou-W, Hang Seng Bank, CNOOC, Jinke Services, Guangzhou Automobile Group and Chinasoft International.

Sentiment Tracking: The short position of Hang Seng Index has risen above the mean 1 standard deviation since 2021.

1) Valuation and risk premium: as of 7.19, the Hang Seng Index's PE ratio fell to 8.9x, and the risk premium (relative to US bonds) rose to 6.96%. From the perspective of PB-ROE, it still has cost-effectiveness among major global stock indexes. 2) Short position: Last week, the short selling ratio of the Hang Seng Index rose to 18.0%, and it exceeded the mean by more than 1x standard deviation above since 2021 on Friday with a single day increase of 20%, in which the short selling ratio of Hong Kong Internet and related stocks slightly rose to 0.68% on a month-on-month basis, while the short selling ratio of Hong Kong real estate stocks also slightly rose to 1.55% on a month-on-month basis. 3) Put-call ratio: The put-call ratio of the Hang Seng Index rose to 1.02 last week, showing that investors have increased demand for downside protection. 4) Warrant trading volume: The derivative warrant trading volume in Hong Kong rebounded to HKD 4.34 billion last week on a weekly basis, accounting for 4.52% of the total turnover on the main board, indicating a bottoming out rebound.

Risk warning: the valuation model may fail; the statistical caliber may be incorrect.