Hong Kong stocks surged in the afternoon. As of the close, the Hang Seng Index rose more than 2%, rebounding to 19,615 points; the Hang Seng Tech Index increased by about 4%, with concept stocks rising one after another. Among them, Meituan rose more than 7%, JD.com rose more than 5%, Xiaomi, and Semiconductor Manufacturing International Corporation (SMIC) rose more than 4%.
Guotai Junan pointed out that in the past week, the three major Hong Kong stock indices continued to fall in valuation. The valuation of the Hang Seng Tech Index fell more significantly. However, southbound funds continued to maintain net inflows. Considering the improvement in overseas liquidity in the future combined with intensified domestic policies, there is still room for the Hong Kong stock market. The following is the original text of the Guotai Junan research report:
In the past week, the three major indices of Hong Kong stocks continued to decline in valuation. The forward 12-month profit forecast for the hang seng tech index has continued to rise, and the expectations on the fundamental side have gradually stabilized. Currently, Hong Kong stocks offer a high value-for-money configuration. Considering the subsequent improvement in overseas liquidity combined with increased domestic policy support, there is still room for the Hong Kong stock market to rise. In the past week (11.15-11.22), the forward 12M EPS forecast for the hang seng index/hang seng tech index was -0.1%/+1.2% quarter-over-quarter, and the latest forward 12M EPS growth rate forecast for the hang seng index/hang seng tech index was -1.0%/-1.2% quarter-over-quarter, reflecting an upward revision of the profit expectations for the hang seng tech index, with growth slightly adjusted downwards.Estimated P/E ratio.The hang seng index has fallen to 8.8 times, below the historical negative one standard deviation. The forecast pe for the hang seng tech index/hang seng china enterprises index has dropped to 15.5/8.2 times, with the forecast pe for the hang seng tech index close to the historical negative one standard deviation. The risk premium rate of the hang seng index has increased to 6.9%, near the historical average. The Shanghai-Hong Kong AH premium index has decreased by 1.2% quarter-over-quarter, corresponding to a relatively high historical percentile of 87.8%.
Southbound funds continued to show net inflows, with the single-month net inflow scale in November reaching a historical high in the past three years. Last week, the speed of net inflows for southbound funds slightly slowed down. In the past week, sectors that received accelerated net inflows from the southbound funds included media, banks, healthcare/biotech, automotive, non-bank financials, communications, and petrochemicals. Among them, media/healthcare/banking sectors had weekly net inflows reaching 5.05/4.4/4.02 billion Hong Kong dollars respectively. The banking sector has been receiving significant net inflows since mid-October. Additionally, last week, only the light industry/manufacturing and beauty/personal care industries showed net outflows for southbound funds. The trading volume in Hong Kong stocks dropped significantly, resulting in a decrease in turnover ratio. However, it is worth noting that the short-selling ratio in November has continued to rise, and the greed-fear index indicates that market sentiment is gradually approaching the point of fear. On the liquidity front, the government bond term spread widened by 3.35 basis points on a week-on-week basis; overnight/3-month HIBOR rates both decreased; the USD/CNY closing price decreased to 7.19, and the USD/HKD decreased to 7.78.
The valuation of the Hang Seng Tech Index has fallen significantly, but there is room for improvement in the future. Consumer/finance/information technology PE ratios are relatively low. In the past week, only the raw materials sector saw an improvement in valuation. Regarding valuation, the latest PE ratios for the Hang Seng Index/Hang Seng Tech Index are 9.0/21.4 times, with changes of -0.1/-0.7 times compared to the previous week. They correspond to historical percentiles of 12.7%/9.4%, with the valuation of Hang Seng Tech Index falling more significantly. Industries with low PE valuations include finance/energy/telecom, with only the raw materials sector showing an improvement in valuation in the past week, up by +0.2 times, while consumer/finance/information technology PE ratios are relatively low. Industries with low PB valuations include real estate/energy/industrials, essential consumption/utilities/real estate PB percentiles trailing.
Key stock profit expectations in Hong Kong stocks: Key stocks with the most significant increase in 2024/2025 forecasted net income growth compared to the previous month include Kingsoft, Meituan, Xiaomi, etc. In terms of forecasted revenue growth for 2024, Semiconductor Manufacturing International Corporation (SMIC), East Buy, NIO experienced significant increases compared to the previous month, while for 2025, Xpeng Motors, Xiaomi Corporation, and SenseTime saw notable improvements in forecasted revenue growth rate compared to the previous month. Looking at the consistent forecasted revenue growth rate for 2024, key companies in Hong Kong such as Tongchengtravel, Xpeng Motors, East Buy have the highest forecasted revenue growth rates, with Tongchengtravel, Xiaomi Corporation, East Buy showing the most significant improvements in forecasted growth rate since the beginning of the year. Considering the 2025 forecasted revenue growth rate, Xpeng Motors, NIO, Ideal Motors, SenseTime, Hua Hong Semiconductor have the highest forecasted revenue growth rates, with Xpeng Motors, NIO, and Hua Hong Semiconductor showing the most significant improvements in forecasted growth rate since the beginning of the year. For profit forecast of key stocks in Hang Seng Index: AIA, Citic, China Life Insurance have the highest forecasted revenue growth rate for 2024, while Meituan, Tencent Holdings have the fastest forecasted net income growth rate for 2024. For profit forecast of key stocks in Hang Seng China Enterprises Index: Citic, China Life Insurance, Xiaomi Corporation have the highest forecasted revenue growth rate for 2024, while Meituan, Zijin Mining Group have the highest forecasted net income growth rate for 2024.
Risk factors: 1) Domestic economic recovery progress lower than expected; 2) Escalation of international geopolitical events; 3) Disturbance to overseas recession expectations; 4) US Federal Reserve's monetary easing pace exceeds expectations.
