Source: Securities Times.
Author: Chen Xiachang

$Hang Seng Index (800000.HK)$Last week (September 23-27), accumulated a 13% increase, with a total increase of 17.48% in September. The daily turnover of 445.7 billion Hong Kong dollars set a historical record, and the Hong Kong stock market saw a long-lost uptrend.

On October 2, the Hang Seng Index rose by 6.33% at the close, rising by 8.91%. $Hang Seng TECH Index (800700.HK)$On October 2, Hong Kong stocks surged again, with the Hang Seng Index rising by 6.33% at the close, an increase of 8.91%. Brokerage stocks became the leading sector, with Swhyhk soaring 206% in a single day, and First Shanghai's stock price doubled.

In fact, compared to the explosive rise of A-shares, the rise in Hong Kong stocks seems more like a long-awaited carnival. The Hang Seng Index has been steadily rising this year, with a year-to-date increase of 23.97% (as of September 30), surpassing $Nasdaq Composite Index (.IXIC.US)$N/A.$S&P 500 Index (.SPX.US)$,$Nikkei 225 (.N225.JP)$major national stock market indices, ranking first among global major stock indices.

Long-time no see bull market

"It feels a bit like a Hong Kong drama 'The Greed of Man.'" When interviewing Liang Yuan, he still couldn't suppress his excitement. Liang Yuan is a student at the Faculty of Business and Economics at Hong Kong University, and only started getting involved in the stock market last year.

"I mainly focus on some blue chip stocks, like banks, communications, and some popular stocks with large trading volumes. Before this week, I had both profits and losses. But the profit for last week alone exceeded 20%." When mentioning the 20% figure, Liang Yuan couldn't help but smile.

Compared to Liang Yuan's excitement, Mark is obviously much calmer. He has been investing in Hong Kong stocks for over 20 years. Previously, he worked as an investment manager in a large financial institution in China. Starting this year, he set up his own private equity fund.

"The value of Hong Kong stocks is actually well known to everyone. In the past two years, the prolonged slump in Hong Kong stocks was not closely related to the fundamentals of listed companies. It's all about whether you dare to buy and when to buy. Investing requires foresight and the ability to quickly assess sudden events. The Fed rate cut was expected, so we would lay out some cyclical stocks in advance. But the strength of the policies introduced by domestic regulatory agencies took everyone by surprise. After the news came out, we quickly increased our holdings in real estate and finance stocks." Mark commented on last week's market performance when talking to reporters.

"I have never opened a securities account in Hong Kong. I mainly invest in Hong Kong stocks through QDII funds. Investing in Hong Kong stocks is for asset allocation considerations, as the Hong Kong market has many companies that mainland stock markets do not have." Zhao Ting is a housewife living in Shenzhen, but she has her own ideas about investment and finance.

"The Hong Kong stock funds I bought before, especially those held for a long time, suffered significant losses. I didn't expect that in a week, several funds have already rebounded. But I won't increase my investment, I'll just consider it as long-term asset allocation." Zhao Ting said.

The popularity of Hong Kong stocks is also directly reflected in the number of account openings.

Futu Securities data shows that the number of Hong Kong stock account openings increased by 103% last week. An employee told the reporter that the number of mainland residents inquiring about account openings has surged recently. She reminded investors who want to open Hong Kong stock accounts that currently, opening a Hong Kong stock account requires an in-person visit to Hong Kong, with documents including identification, proof of address, entry records, and a certain amount of cash. Investors first need to open a local bank account in Hong Kong, and the bank will arrange interviews, verify identities, and go through other procedures before finally signing an account opening agreement.

Who is buying Hong Kong stocks?

According to statistics, the sectors with the largest increase in Hong Kong stocks last week were baijiu (Chinese liquor), beer, car dealers/auto retailers, and China-affiliated brokerage stocks, with increases of 36.55%, 30.44%, 30.31%, and 29.56% respectively.

Compared to the overall rise in the index, there is a significant divergence in the performance of various industries. As of September 30, only three industry indices outperformed the Hang Seng Index, namely information technology, materials, and energy, with increases of 32.92%, 32.81%, and 26.87% respectively. Among the 82 constituent stocks of the Hang Seng Index, 56 rose, while 26 stocks are still in a declining trend.

"Baijiu and brokerage stocks are industries that are more closely watched by southbound funds. One represents consumption, and the other is the sector that benefits the most in a bull market." Mark told the reporter, "In the A-share market, the brokerage sector has always been known as the 'vanguard of a bull market'. Because trading volume has a direct impact on the performance of brokerage firms, this was not a common saying in the Hong Kong stock market before. However, as more and more China-affiliated brokerage firms are listed in Hong Kong and included in the Stock Connect program, they are also favored by southbound funds."

According to Wind data, foreign institutional investors bought the most last week $CCB (00939.HK)$ , buying approximately 526.0399 million shares, with a current holding of 58.55 billion shares, and international institutional holdings account for 24.34%. The second-ranked is$SENSETIME-W (00020.HK)$, foreign investors bought around 340.4607 million shares, with the latest holdings of 7.309 billion shares, and international institutional holdings account for approximately 21.14%. In addition,$CHINA TOWER (00788.HK)$,$UNI-BIO GROUP (00690.HK)$and Industrial and Commercial Bank of China have also been buying more by foreign investors in the past week, with 337.8232 million shares, 301.039 million shares, 284.1731 million shares respectively. In addition, Bank of China,$ABC (01288.HK)$And.$MINSHENG BANK (01988.HK)$Also heavily bought by foreign investors.

"International capital prefers large financial stocks such as banks and insurance, as well as large technology stocks. Financial stocks have been performing well this year due to good dividends. In comparison to the ongoing tech bull market in the US, Chinese tech stocks have lagged behind significantly. Investment value is always relative." Mark analyzed. $TENCENT (00700.HK)$ and $BABA-WR (89988.HK)$ The continuous buyback of $Alibaba-WR (89988.HK)$ has gradually shown the company's investment value. More importantly, compared to the tech bull market in the US, Chinese tech stocks have lagged behind by far too much. Investment value is always relative." Mark analyzed.

The future market outlook is worth looking forward to.

Regarding the fourth-quarter performance of the Hong Kong stock market, mainstream institutions remain optimistic, but there are also institutions warning of risks.

"I firmly believe in the investment value of Hong Kong stocks, especially dividend-rich blue chips and technology stocks. However, with such a rapid increase, I will be more cautious, gradually reducing positions, and buying back after a correction," Mark said.

Mark's views are widely representative.

Haitong International analyst Zhou Linhong also believes that the current rapid rise and repair wave is basically in place, with short-term upward momentum but already overbought. Zhou Linhong believes: "Most of the funds that can enter the market in the short term have already entered. At the current position, patience is needed to wait for the layout opportunities for fluctuations, roughly around 20000 to 22000 points for the Hang Seng Index, and 3100 to 3300 points for the Shanghai Composite Index to start oscillating."

In addition, Zhou Linhong also cautioned investors to pay attention to some risks, including disturbances from the USA election, global regional conflicts, and domestic economic data issues.

"But any pullback is an opportunity for layout. We expect there will still be a third wave of upward trend by the end of the year to repair valuations again, and next year will usher in a comprehensive rise. The third wave trend still needs to see the improvement in fundamentals, while next year's trend will be profit-driven. The second half of this year is expected to be a profit bottom," Zhou Linhong emphasized.

Meanwhile, Guotai Junan (Hong Kong) analyst Zhan Chunli sees the appreciation of the Renminbi as a driving force for the continued rise of Hong Kong stocks. According to his statistics, there is an obvious resonance relationship between the Renminbi exchange rate and Hong Kong stocks; usually when the Renminbi appreciates, Hong Kong stocks also rise, and when the Renminbi depreciates, Hong Kong stocks also fall.

"The appreciation of the Renminbi has a stimulating effect on the Hong Kong stock market for four reasons. First, the proportion of China-affiliated companies listed in Hong Kong is large, with the number of companies accounting for over 50%, and their market capitalization representing approximately 80% of the total Hong Kong stock market value. China-affiliated companies calculate profits in Renminbi, but are valued in Hong Kong dollars, so the appreciation of the Renminbi will increase the numerator-end profit level. Second, the appreciation of the Renminbi usually leads to a decrease in the U.S. dollar interest rate, which, from a denominator-end logic perspective, will also trigger a rebound in the Hong Kong stock market. Third, it is beneficial for southbound funds through the Stock Connect program, quoted in Hong Kong dollars with settlement in Renminbi. Fourth, many China-affiliated companies listed in Hong Kong have issued U.S. dollar bonds, with a stronger Renminbi which also helps reduce the companies' interest and repayment costs." said by Zhan Chunli.

As for which sectors have more investment value, analysts and fund managers have different preferences.

Zhou Linhong stated, the current rapid rise is mainly due to the valuation recovery of major financial stocks and the internet leading the way. After the market sentiment shifts, there will still be plenty of opportunities for technology sectors, the new productive forces in the growth style, especially in hardware technology, AI, high-end manufacturing, and innovative drugs, which will become the market mainstream.

Xing Cheng, a Manager at Hang Seng Qianhai Fund, suggests focusing on a balanced strategy. On one hand, pay attention to industries sensitive to interest rate declines in the growth track, such as the internet, electric vehicles, technology hardware, and biomedical industries, which are longer-term sectors. On the other hand, focus on high-dividend blue-chip targets with more predictable shareholder returns.

Zhang Jintao, Director of Jia Shi Fund's Value Style Investment, pointed out that from a global market valuation attractiveness and fund rebalancing perspective, A-shares and high-quality assets in Hong Kong have a strategic advantage. For example, China's leading internet companies are undervalued globally, and if foreign capital returns, they may prefer to buy these types of high-quality assets with certain growth prospects and good competitive positioning. With overseas risk-free interest rates declining, undervalued and high-dividend Chinese assets are more attractive, and Hong Kong stocks are expected to be the preferred choice for global fund allocations into Chinese assets.

"When 'The Greed of Man' aired, I hadn't been born yet, but it's my favorite Hong Kong drama. Not only does the drama depict the ups and downs of the stock market, but it also explores many aspects of human nature. I hope to stay in Hong Kong after graduation and work in the financial industry, to have the opportunity to experience a new era." Liang Yuan expressed to the reporter in the interview's conclusion.

Editor / jayden