Time flies, 2019 years have passed, looking back at 2019, the Hang Seng Index closed up 9.07% for the whole year, relatively weak in the three major stock indexes, and the market gradually emerged from uncertainty. Looking back on the year, what are the main changes worth paying attention to in the Hong Kong stock market? What trends will guide the new direction of the capital market?

This article will describe the major changes of the Hong Kong stock market in 2019 (market as a whole, IPO, liquidity, interconnection), and look forward to the changes of the Hong Kong stock market in 2020 according to the planning of the Hong Kong Stock Exchange. At the same time, we will explore the current valuation levels of various sectors, look back on the Hong Kong stock market in 2019 and look forward to the Hong Kong stock market in 2019.

Looking back at 2019: there are a thousand sails passing by the sunken ship.

1. the whole picture of the capital market: rise abruptly based on accumulated strength.

The number and total market capitalization of listed companies are at a new high. According to the "Hong Kong Exchanges and Clearing 2019 Market Statistics" disclosed by the Hong Kong Stock Exchange, there were 2440 listed companies in the Hong Kong stock market in 2019, an increase of 5.40% over the same period last year, of which 164were newly listed, down 24.77% from the same period last year, with a total market capitalization of HK $36.58 trillion, an increase of 22.32% over the same period last year.

The valuation differentiation of the main board and the gem.After the baptism of 2018-2019, the stock index of the Hong Kong stock market continues to differentiate, among which, the average price-to-earnings ratio of the main board is 12.42 times, and the average price-to-earnings ratio of the gem is 20.86. in terms of the average dividend ratio, the dividend yield of the main board is 2.83%. The valuation of the gem is 1.87%. The valuation of the main board in 2019 is significantly higher than in 2018, and the overall valuation continues to decline due to liquidity and policies.

The annual listing situation is divided.According to the "Hong Kong Exchanges and Clearing 2019 Market Statistics" disclosed by the Hong Kong Stock Exchange, the newly listed companies through the new listing mechanism include one company with different voting structure, two companies listed in 2018, nine companies listed in biotechnology and five companies listed in 2018. One company listed in the convenient secondary listing channel, compared with 0 in the same period in 2018. Hong Kong Exchanges and Clearing's innovative mechanism in securities listing continues to play a role, and 14 companies have transferred from GEM to main board listing in 2019. From the classification of newly listed companies, the main board market is still the mainstream trend of listing.

The number of motherboard companies is constant.However, the proportion of the total number of companies in the market is still about 85%, and there is no very significant change. The number of companies listed on the main board still constitutes the main body of the Hong Kong stock market.

The number of companies listed on the Hong Kong Stock Exchange as a whole is booming in 2019, and the increasing number of stocks will bring more opportunities for investors. The falling overall valuation has also reserved some upward space for the Hong Kong stock market in 2020.

2. IPO: contend for the best.

Top of the list in a row.Despite the severe global political and macroeconomic environment, Hong Kong once again ranked first in the amount of capital raised by the world's major exchanges IPO in 2019, the fourth time in the past five years, further consolidating its position in the world's leading IPO market. According to the "Hong Kong Exchanges and Clearing 2019 Market Statistics" disclosed by the Hong Kong Stock Exchange, Hong Kong's initial public offering raised more than US $37.9 billion, far ahead of Saudi Arabia, which ranked second in the list. Saudi Arabia ranked "No. 2" mainly because of the listing of Saudi Aramco, which raised a lot of money.

Strong fund-raising ability.Although the amount of money raised continues to be at the top of the list, and the amount raised is higher than in 2018, overall, the number of new shares issued this year is significantly lower than that of last year, especially the number of new shares on the gem. As of December 31, a total of 175 companies have been listed in Hong Kong stocks, of which 141 are newly listed on the main board and only 15 are newly listed on the gem (excluding transfer and delisting). Last year, a total of 218 companies were newly listed in the Hong Kong stock market, including 143 on the main board and 75 on the gem (excluding transfer board and delisting). Public data show that the number of companies listed on Hong Kong's gem this year is the lowest in nearly seven years.

The number of new shares has decreased compared with last year, but the amount of capital raised has not decreased, mainly due to the return of BABA. The total amount raised by the top 10 IPO in 2019 was HK $207.64 billion, up 11.3% from the HK $186.57 billion raised by the top 10 IPO last year.

Judging from the current composition of listed companies, the Cayman Islands has the largest number of registered companies, up to 1385, while only one in Israel and Italy respectively. In 2019, the number of Singapore listed companies in Hong Kong is gradually increasing. According to the "2019-2021 Plan" of the HKEx, it is expected that the composition of companies listed on the HKEx will have a more global effect.

Hong Kong IPO in 2019 competes for the best. There are not only a large number of listed companies, but also a large number of well-known enterprises, and at the same time, the amount of capital raised is large enough, which will continue to attract all kinds of enterprises in the international market to come to Hong Kong to refresh IPO,IPO as an alternative investment opportunity in 2020. Hong Kong new shares Pre-IPO, cornerstone investment, international placement and public placement market is expected to continue to be hot.

3. Liquidity stratification: the strong are always strong.

The age of giants.Compared with the rapid development in the past, large enterprises eat meat, small enterprises drink soup, and everyone is at peace with each other. In the era of stock economy, the market share does not expand as rapidly as in the past. At this time, large competitive enterprises will turn around to seize the market share of small enterprises, while large enterprises have the money to hire better talents to participate in market competitors. Small enterprises are increasingly uncomfortable, as can be seen from the purchasing managers' index (PMI). There is a serious differentiation among enterprises of different sizes:

Big companies take up more liquidity.The market hand of the capital market is more effective and will take the initiative to allocate resources to places with higher efficiency. under the background of the deteriorating competition pattern faced by small enterprises, large enterprises are developing steadily in operation. the trend of the capital market has gradually formed a Matthew effect. In the past few years, the proportion of the top 10 companies with turnover in Hong Kong stocks has continued to increase.

The transaction is active and the company is changing steadily.Since the opening of interconnection in 2015, the trading heat of the Hong Kong stock market has rebounded obviously. at the same time, with the performance and valuation resonance of blue-chip companies in recent years, on the one hand, traditional blue chips still occupy the list, but new faces have gradually emerged. In 2019, Meituan, Iron Tower and other companies also entered the top 10 transactions.

The cold winter of small and medium-sized companies.However, at the moment when the strong is Hengqiang, capital will further form a feedback effect, and speculative funds are also willing to speculate in large market capitalization companies with more liquidity, which indirectly leads to the increasing marginalization of gem. Gem companies are increasingly short of liquidity, which is expected to require the overall performance improvement of gem companies to boost valuation. In order to reverse the plight of lack of liquidity in terms of earnings expectations and valuation expectations.

In 2019, the liquidity of large market capitalization companies in the Hong Kong stock market is Hengqiang, while the liquidity of gem companies is declining rapidly. the overall opportunities will be concentrated in large and medium-sized enterprises with good liquidity, but when focusing on the stocks of large market capitalization enterprises, at the same time, we can pay attention to the performance-supported companies with "liquidity discount" due to lack of liquidity, under the effect of performance improvement or special dividend. There will be significantly better performance than the market.

4. Interconnection: integrated

Since 2019, the overall Hong Kong market has shown a volatile trend, with a relatively weak performance. By the end of 2019, the Hang Seng Index had risen 9.07%, significantly outperforming the 36.07% increase in the CSI 300 Index and the 28.5% increase in the S & P 500 Index over the same period. However, we can also see that despite the poor trend of Hong Kong stocks, there is still a significant inflow of southward capital. From the beginning of the year to the end of December, there was a total net inflow of 239.2 billion yuan. On a quarterly basis, the net inflow of Hong Kong dollars in each quarter was 8.5 billion, 62.7 billion, 88 billion and 81.106 billion respectively, and the net inflow in each quarter was very strong, and the second half of the year was stronger than the first half.

The flexible distribution of funds between the two places.Judging from the monthly situation, the funds of the two places prefer to be laid out when the market is in the doldrums. For example, in April and May 2019, the mainland stock market was relatively hot, while there was an obvious outflow of Lufentong funds, and the performance of the Hong Kong stock market was relatively low in the second half of 2019. Southward bottom-copying capital performance is enthusiastic, the two places have a certain degree of flexibility in the distribution of funds.

Market preferences are constantly changing.The companies in the top 10 of Hong Kong stock holdings have been changing compared with their shareholdings at the end of last year, and the top 10 companies in the previous year.

Hong Kong shares are among the top 10 companies with a market capitalization of 100 billion yuan. By the end of 2019, the companies with a market capitalization of more than 100 billion yuan and the top 10 Hong Kong shares were mainly concentrated in the financial, real estate, medical, consumer and other industries, with the exception of Sunac China, Geely Automobile and HSBC Holdings PLC.

At the end of 2018, Hong Kong shares are among the top 10 billion companies with market capitalization. Looking back in 2018, the companies with a market capitalization of more than 100 billion yuan and the proportion of Hong Kong shares in the top 10, while at the end of 2019, only Industrial and Commercial Bank of China, Agricultural Bank Of China and China Construction Bank Corporation increased their holdings, while other companies increased their holdings significantly, and even reduced their holdings, especially for all-star companies such as China Merchants Bank, the proportion of Hong Kong shares was even reduced by nearly half. And at the end of 2018, the companies with the top 10 share holdings in Hong Kong at the end of 2018 are mainly concentrated in the financial industry, while at the end of 2019, the industry distribution is relatively more scattered.

Hong Kong shares rank 50-100 billion companies by market capitalization. By the end of 2019, the companies with a market capitalization of 50-100 billion yuan and the top 10 Hong Kong shares were mainly concentrated in health care, information technology, finance and other industries, with the exception of Great Wall Motor and China Holdings, the overall shareholding ratio is still significantly higher than that at the end of 2018.

At the end of 2018, Hong Kong shares are among the top 10 companies with 50-100 billion market capitalization. Looking back in 2018, among the companies with a market capitalization of 50-100 billion yuan and the proportion of Hong Kong shares in the top 10, Great Wall Motor, Xinjiang Goldwind Science & Technology and Dalian Port were reduced by a large proportion at the end of 2019 compared with the end of 2018. Judging from the change of the proportion of Hong Kong stock holdings, the stars of the previous year may not necessarily become the stars of the next year, and the investment way of simply following Hong Kong stock funds has some defects, which is even more important for the market investment choice ability.

The southward capital inflow in 2019 is rapid, and the stocks concerned by the North Water have a better performance than the market. It is suggested that the trend of the North Water should be paid close attention to. At the same time, during the second half of 2019 when the Hang Seng Index is declining, the speed of the North Water going south will accelerate, and the industry layout will prefer financial, real estate and other enterprises. It is expected that the Hang Seng Index will be significantly supported by Beishui, which is actively bottoming out in 2020.

Second, look forward to 2020: sit and watch the green bamboo turn into Qiongzhi

1. Looking at the Hong Kong stocks in 2020 from the planning of the HKEx: making great progress.

HKEx plays an important role in Hong Kong's capital market, and its strategy and planning will directly affect the trend of Hong Kong's capital market in the next stage.

The planning of the HKEx. At present, Hong Kong Exchanges and Clearing's vision is to become the world's leading Asian time zone exchange, connecting China and the world. At present, Hong Kong Exchanges and Clearing is already a major market for capital flowing in and out of mainland China, and Hong Kong Exchanges and Clearing hopes to make further efforts on this basis, on the one hand, to increase his international influence on China and Asian markets, on the other hand, to enhance Hong Kong Exchanges and Clearing's importance as an Asian market to the international market, and to become the preferred market for investors and issuers in the Asian time zone.

The HKEx will make efforts in three areas of development:

(1) having a foothold in ChinaThrough two-way capital flows: a. Make use of a series of northbound plans to promote the internationalization of the capital market in mainland China; c. Make use of a series of southbound plans to facilitate the diversified asset allocation of wealth in the mainland of China.

(2) connecting the whole worldIt is mainly reflected in two aspects: a. To further enhance the attractiveness of the Hong Kong market to global capital; b. Provide more Asia-Pacific investment products in the Hong Kong market

(3) embrace technologyTo achieve two major goals: a. Speed up the modernization of the main business, improve efficiency and maintain growth; b. Expand new opportunities and explore new worlds.

In a predictable direction. Combined with the current situation of the Hong Kong stock market in 2019 and the work that Hong Kong Exchanges and Clearing has promoted, and according to the "Strategic Plan 2019-2021" described by Hong Kong Exchanges and Clearing, it can be expected that there may be:

(1) A-share futures products

(2) R & D connectivity to support cross-border transactions in RMB fixed interest rate and currency derivatives markets

(3) more commodity products

(4) to become the ETF issuance and trading center in the Asia-Pacific time zone.

(5) to speed up the development of new derivatives and structured products

(6) to increase the market liquidity of spot and derivative products:

(7) optimize the trading platform.

In 2020, the HKEx is expected to continue to be aggressive, the variety of investment will be further enriched, and the convenience of trading will be enhanced. It is even more expected that the HKEx will continue to go out to sea to expand its "scope of investment". This will make Hong Kong's position as an international financial center more prominent, at the same time, it will also open up investment in many markets in Hong Kong, enrich the trading activity of the Hong Kong stock market, and IPO will also be more active. Investors can pay close attention to the increase in new products in the Hong Kong stock market and the systemic dividends brought about by the IPO boom.

2. From the point of view of valuation, Hong Kong stocks are ready to start.

The overall valuation is down.According to the data provided by Hong Kong Exchanges and Clearing up to November 2019, the gem weekly dividend rate (also known as dividend yield) continues to climb, from 0.45% at the end of December 2018 to 1.87% at the end of November 2019, while the weekly interest rate on the main board is declining. it fell from 3.34% at the end of December 2018 to 2.83% at the end of November 2019, and the gradual increase in the weekly dividend rate on the gem is related to special dividends. At the same time, it is also related to the "rapid decline in valuation" caused by the low liquidity of the gem in the past two years.

At the same time, the overall price-to-earnings ratio of the Hong Kong stock market is declining, with the price-to-earnings ratio of the main board falling from 17.84 times at the beginning of January 2018 to 12.42 times at the end of November 2019, but rising to 12.42 times from 10.45 times at the end of December 2018. However, the valuation of the gem continues to decline, from 35.86 times in early January 2018 to 20.86 times at the end of November 2019, and 28.16 times in December 2018. Falling price-to-earnings ratios also leave room for a later upside in valuations.

Industry valuation divergence.Although the overall valuation of the market is declining, the valuations of consumption, information technology and other industries are still at the highest level in nearly five years, which is related to the tradition that the capital market in the valuation stage prefers consumer stocks with more stable performance. on the other hand, the market of the information technology sector is related to the booming 5G, resulting in a higher valuation level of the information technology sector. Other industries except health care, public utilities and real estate are in the middle level of historical valuation, while other industries are basically at a low historical valuation.

Judging from the valuation trend in the past five years, the valuation of information technology continues to rise, while industry and telecommunications continue to decline, and the financial sector is in a more balanced position, but the overall valuation is not high. It is expected that as the economy is expected to recover in a short cycle in 2020, the market will perform better in areas with lower valuations, such as financial and industrial sectors.

The overall valuation of large companies in hot industries in 2019 is better than that in 2018, and the Matthew effect is further strengthened, while small and medium-sized companies due to the recent lack of liquidity lead to a substantial valuation discount, which may be due to improved performance. Finally, it may usher in the "Davis double-click" of valuation and performance. In the field of industry differentiation, the early valuation is relatively low. However, the industry that is expected to be put into large-scale production in 2020, the financial sector of cyclical economic recovery is expected to usher in a dual return of valuation and performance, and the Hong Kong stock market may usher in a return of valuation in 2020.

Summary: how can the beautiful spring all over the garden be closed?

By the side of the sinking boat, the capital market in 2019 has passed, the differentiated liquidity has driven the valuation differentiation seriously, the interconnection has opened up the flow of funds between the two places and excavated the value of assets, and the successful IPO of hundreds of companies has also brought a number of star enterprises in the business community to Hong Kong stocks.

With the collective efforts of Hong Kong's capital market regulators, enterprises and investors, the Hong Kong stock market will gradually grow "Green Bamboo" into "Qiongzhi" towards the "HKEx 2019-2021 Plan". The valuation levels of various sectors that have been gradually digested in the reform of the capital market in the past two years will also open a window for the future "full garden". It is expected that 2020 of the Hong Kong stock market will be expected in terms of a wide range of investments, more IPO debut, high-quality corporate performance and valuation return.