At a historic moment, smart funds have told us the direction: Hong Kong stocks! Goal: core assets!

At 2 pm today, Hong Kong stocks bought more than HK $20 billion, an all-time high. It is clear that capital is embracing Hong Kong stocks and core assets.

First, smart funds foresight, southward funds continue to buy

The funds of the Shanghai-Hong Kong Stock Connect, which is famous for its foresight, has performed well in terms of timing and stock selection. After the trade friction launched by the United States in 2019, as the macro-economy gradually stabilized and marginal improved, southbound funds from Shanghai and Hong Kong continued to flow into the Hong Kong stock market and accelerated in 2020.

At the end of the year, southward net buying exceeded 10 billion yuan for 10 consecutive days, providing abundant funds for the market, igniting market enthusiasm at one stroke, and pushing the Hang Seng Index to a smooth start to 2021. According to statistics, since the Christmas holiday on December 28, the Hang Seng Index has risen nearly 10%.

According to the AH parity, Hong Kong stocks still have valuation advantages over A shares, and the price difference between the two markets will gradually narrow in the long run for the same assets.

It is precisely because good assets have good prices that they continue to attract capital to the south.Since 2020, the number and scale of public offering funds that can invest in Hong Kong stocks through the Shanghai-Hong Kong Stock Connect have been increasing, from more than 700 to more than 1600, and the scale has increased rapidly from more than 600 billion to 2.2 trillion. This has also consolidated the bottom of the Hong Kong stock market in 2020 and laid the foundation for this year's take-off.

Well, so far, we know that embracing Hong Kong stocks is embracing core assets, but this is only going in the right direction. Which targets should we focus on?

Second, big is beautiful, and the market prefers large enterprises.

Let's first look at the preferences of the market, which can be summed up in a word.The head effect of Hong Kong stocks is obvious, and very few large market capitalization companies occupy a lot of market liquidity.Click to view the "Review of Hong Kong stocks: the bigger the market capitalization, the more popular it is, and the new economic era of Hong Kong stocks is coming."

1. Large companies have a valuation premium and occupy the main liquidity of the market.

According to the percentile of market capitalization, the turnover of the leading companies ranked Top1% by market capitalization (Tencent, BABA, HSBC, etc.) expanded rapidly in 2020, Q4 reached 58.107 billion yuan in 2020, and the turnover of companies with rapid growth in four quarters (Haidilao International Holding, Country Garden Holdings, etc.) remained at about 33 billion.

The companies in the top 5 per cent of Hong Kong's market capitalization (about 120) account for nearly 80 per cent of the market's average daily turnover, while the companies in the Top1% by market capitalization (25) account for nearly 50 per cent of the market's turnover. For companies with 50 per cent of market capitalization, they account for less than 1% of the overall liquidity of the market. There is a big difference between heaven and hell.

It can be seen that big is beautiful, the market favors large enterprises, and the head company enjoys absolute abundant liquidity.Due to the current economic development, leading companies play the role of center, node and platform in the industrial chain and business model, and can effectively deploy resources, drive surrounding enterprises, promote the ecological development of the whole industry, and play an engine-driven role. therefore, whether the income or social value created is higher than the average level of the market, the market will prefer them and give them a premium on valuation.

2. The head company is favored by southward funds, and its share price continues to hit new highs.

Of course, the Hong Kong Stock Exchange Capital will certainly pay more attention to these good companies in Hong Kong stocks. From the trading situation of the Shanghai-Hong Kong Stock Connect, we can see that similar head companies account for the main liquidity. Since December 7 last year, the turnover of the top 10 stocks accounted for more than half of the total turnover, and some trading days even reached 80%.

In the past month, southward funds have made the top 10 net purchases: Tencent ranked first, with a purchase volume of more than 50 billion yuan, while China Mobile Limited's stock price fluctuated due to changes in US market policy, but the capital quickly entered the market.Of course, if you want to know the capital flow of Shanghai-Hong Kong Stock Connect every week, you can follow the weekly observation of Lu-Hong Kong Stock Connect of Futu Research and continuously track the movement of funds.

Although XIAOMI Group, which was named by the US Department of Defense last week, fell sharply on Friday, it has a great potential to stabilize today. Judging from the top ten net purchases on Friday, southward funds are also constantly coming in.

While the capital keeps buying, the share prices of these companies continue to hit new highs. Just this afternoon, Tencent has reached an all-time high of 667.50 Hong Kong dollars.

Conclusion

These leading companies and Big Company in the Hong Kong stock market are the core assets of the current economic development. These enterprises with strong brands and leading technology play a vital role in driving the ecological development of the industry. In this ecology, they may also be small and medium-sized enterprises in the ecology, and they will have the opportunity to become the breeders, participants and even pioneers of the next industrial revolution.

Embrace core assets and buy Hong Kong stocks at the right time!