October 5th, Caixin reporter Yan Jun reported that unable to buy A shares, Hong Kong-listed ETFs tracking the A-share index have become the strongest substitute.

Throughout the entire holiday, Hong Kong-listed ETFs have become a financial playground, with Hong Kong-listed ETFs tracking the Star Market surging by 234% intraday, a high increase that also hides high risks. The fallback after the disappearance of the premium, as mentioned by Dan Bin, warns of "a sharp decline after a sharp rise."

Three Hong Kong-listed ETFs doubled their weekly gains.

Hong Kong stocks only took a one-day break on October 1st, continuing the strongest rebound. Many indexes regained lost ground within just 5 trading days. Taking the pharmaceutical sector as an example,$Hang Seng Hong Kong-Listed Biotech Index (800805.HK)$, with a nearly 5-day increase of 24.9% and a year-to-date return turning positive to 5.78%, $Hang Seng Healthcare Index (800804.HK)$ The period return is 23.66%, the year-to-date return is 2.98%. In a general rising market, the year-to-date returns of major Hong Kong stock indices are almost all positive.

Previously low-profile Hong Kong ETFs gained a lot of attention during the National Day holiday.

On the morning of the 2nd, the Southern Dongying STAR 50 Index ETF surged by 234.3%. The fund company urgently issued a risk warning mid-day, mentioning potential trading risks such as significant secondary market premiums. By the closing, the increase fell back to 29%. On the same day, there were still $Bosera STAR 50 Index ETF (02832.HK)$Please use your Futubull account to access the feature.$Bosera SZSE Chinext Daily (2x) Leveraged Product (07234.HK)$ funds with closing gains of 106.19% and 60.22%.

By the 3rd, Hong Kong stocks had a slight pullback, ETFs calmed down slightly, with several ETFs experiencing some correction. By the 4th, Hong Kong stocks rose strongly again, with the semiconductor sector breaking out. $Bosera Star 50 Index ETF-R (82832.HK)$N/A.$Global X China Semiconductor ETF (03191.HK)$ETFs have increased by 28.83% and 12.44% respectively.

From the recent 5-day price changes, the ETF tracking the A-share index ranks highest in terms of gains. Among them, $Bosera SZSE Chinext Daily (2x) Leveraged Product (07234.HK)$Please use your Futubull account to access the feature.$Bosera STAR 50 Index ETF (02832.HK)$Please use your Futubull account to access the feature.$Bosera Star 50 Index ETF-R (82832.HK)$ In the past 5 trading days, it has doubled with gains of 159.73%, 114.86%, 101%, and 82%. In addition, there is also $CSOP STAR 50 Index ETF (03109.HK)$Please use your Futubull account to access the feature.$CSOP CSI 300 Index Daily (2x) Leveraged Product (07233.HK)$Please use your Futubull account to access the feature.$Premia China STAR50 ETF (03151.HK)$ 8 ETFs have risen by more than 50%.

Unlike mainland ETFs, Hong Kong ETFs have a greater variety of types, including leverage and inverse products. Taking the example of XL Bosera SZSE ChiNextETF, the full name of Bosera China ChiNext Price Index Daily Leveraged (2X), according to Bosera International, this is the first Hong Kong-listed leveraged product for China ChiNext. The product aims to adopt a synthetic simulation strategy based on swaps, which means that by buying this product, investors can achieve twice the positive daily performance tracking of the target index.

Regarding the reasons for the significant rise in this product, Bosera International's analysis pointed out that continuous macro bullish policies are the main cause. Following the central bank's interest rate and reserve requirement cuts, the political bureau meeting announced increased fiscal adjustment efforts, while emphasizing promoting real estate market stabilization; subsequently, the People's Bank of China issued a notice to announce large-scale reductions in mortgage interest rates for first and second homes, along with relaxation of purchase restrictions in first-tier cities such as Shanghai, Guangzhou, and Shenzhen.

The combination of the above policies significantly improved market sentiment among investors, increasing investors' risk appetite to a large extent. The encouragement of patient capital by the policies helps attract long-term funds into emerging industries and high-tech sectors. According to recent high-frequency data compiled by brokerages, sectors like semiconductors and consumer electronics have seen marginal improvement in end-demand, while manufacturing with good supply structure and technology sectors related to new quality productivity have shown consecutive quarterly growth in net income.

Bosera International also believes that with the arrival of the third quarter report disclosures, the recovery of performance combined with the improvement in investor preferences is expected to drive valuation recovery for the ChiNext and STAR Market, which have long been at valuation lows. Attention is advised.

With ETFs soaring, on the one hand, funds continue to buy in, while on the other hand, net asset value is also increasing. The scale of related ETFs has repeatedly reached new highs. On October 2nd, the assets under management of CSOP Hang Seng Tech Index ETF broke through 40 billion Hong Kong dollars; on the 4th, Hua Xia Fund Hong Kong announced that the scale of its Hua Xia HSI ESG ETF exceeded 10 billion.

However, some industry insiders believe that in the situation where A-shares have not opened, the gains of individual Hong Kong ETFs tracking A-shares have already been excessively high. Investors need to pay attention to risks such as premiums and cooling sentiment.

Chinese assets are currently experiencing a buying frenzy.

A rise dispels a thousand worries. Since the Fed rate cut, overseas funds have significantly flowed back into Hong Kong stocks. With the unexpectedly relaxed monetary policy in China, it has triggered a surge in A-share and Hong Kong stock markets. During the National Day holiday, Hong Kong stocks only closed for one day, attracting global investors' attention throughout the holiday. Despite a brief pullback on one day, the losses were quickly recovered.

As of the close on October 4th, during the A-share market holiday period, looking at the global market movements, Chinese assets are continuously being heavily bought. In comparison, the Nasdaq 100 index and S&P 500 index increased by 0.23% and 0.15% respectively, while the CSI 300 Index surged by 11.54%; the FTSE China 3x Bull ETF soared by nearly 34%; as for Hong Kong stocks, the Hang Seng Index rose by 7.55%, with central state-owned enterprises dividend assets leading the gains, and the Hong Kong Stock Connect Central State-Owned Enterprises Dividend surged by 12.64%.$S&P 500 Index (.SPX.US)$and the Nasdaq 100 index ranged up by 0.23% and 0.15% respectively,$NASDAQ Golden Dragon China (.HXC.US)$with a range increase of 11.54%; the FTSE China 3x Bull ETF surged by nearly 34%; as for Hong Kong stocks, the Hang Seng Index increased by 7.55%, with central state-owned enterprises dividend assets leading the gains, and the Hong Kong Stock Connect Central State-Owned Enterprises Dividend surged by 12.64%.

Overseas investment institutions are closely monitoring Chinese assets, and throughout the holiday period, domestic and foreign institutional conferences, research reports, and trading desk information have continued to emerge.

In Nomura Securities' research report on October 2nd, it pointed out that this policy stimulus has been quite successful, and believes that the government will definitely implement a series of fiscal measures and other supportive policies in the future. However, Nomura also warns that individual investors, especially those who are too young and have not experienced the ups and downs of the past, are eager to open accounts, fearing to miss what seems to be a rare rebound in a lifetime. After enjoying the initial frenzy, investors may need to pay attention to the worst-case scenarios.

However, more foreign institutional investors have given relatively optimistic views. Goldman Sachs' short-term view points out that the market sentiment in China has changed in the past week, with some marginal adjustments in positions, but there is still room for further adjustment. Recently, retail investors mainly appear in the form of obtaining a broad BETA exposure through ETFs, rather than individual stocks. CTAs have bought an estimated over $15 billion worth of Chinese stocks in the past two weeks. At the same time, Goldman Sachs noted that there is a record high demand for call options.

However, it is worth noting that hedge funds are also buying Chinese stocks, but the majority of the demand comes from accounts in the Asia-Pacific region, while accounts in the USA are still more or less in a wait-and-see mode.

Bank of America Securities Trading Desk provides views on recent A-shares, Hong Kong stocks, and more in response to 8 client questions. First, regarding whether China assets are underweighted, Bank of America Securities believes that in the past two weeks, long-term investors have net bought $3.4 billion, which is similar to the amount bought after the rebound following the previous epidemic, but much quicker. Without the September and October mutual fund holdings data, it is difficult to quantify positions, but looking at trading volume, the current allocation of China assets seems quite full.

In terms of whether to buy A-shares or Hong Kong stocks at the moment, Bank of America Securities believes that the forward P/E ratio of Hong Kong stocks is already close to 10 times, and the momentum-driven rebound has exceeded expectations, but the risk-return is not very attractive; if the appearance of animal spirits among market participants and the judgment of similarity to the bull market from 2014 to 2015 are correct, the valuation of A-shares may be significantly reassessed compared to H-shares.

"Although foreign holdings in H-shares have increased rapidly, domestic retail investment is just beginning. On September 30th, the turnover of finance and securities lending accounted for over 10% of the total turnover, but it is still far below the 18% in 2014," Bank of America Securities pointed out.

Editor/Somer