Hong Kong stocks are becoming the "targeted" area of market funds. On the one hand, the Amure H-share premium index is still at an all-time high, and the performance-to-price ratio of H-share investment is prominent; on the other hand, under the factors such as the return of US-listed stocks, valuation advantages, southward capital and other factors, Hong Kong stocks have become a focus of market attention.

What are the investment opportunities in the Hong Kong stock market in 2021? Which plates are worthy of attention? How should the public offering fund be arranged through the way? China Fund News reporter interviewed Zeng Peng, director of integrated investment research and head of equity investment theme group at Boshi Equity Investment headquarters, Bo Yang, director of Dacheng Fund's international business department and proposed fund manager for Dacheng Hong Kong stocks. HSBC Jinxin overseas Investment Director and HSBC Jinxin Shanghai-Hong Kong-Shenzhen Fund and Hong Kong Stock Connect dual-core fund manager Cheng Li, Cathay Pacific fund manager Zhu Dan, Hu Yaosheng, a selected fund manager for research in Shanghai, Hong Kong and Shenzhen.

These fund managers believe that the most drastic adjustment in the valuation of Hong Kong stocks has passed. Hong Kong stocks may perform better than A shares in 2021, and in the medium to long term, the Hong Kong stock market will emerge from the long-term structural market under the leadership of the China New economy Corporation. Investors are more suitable for the layout of Hong Kong stock funds.

Hong Kong stocks have medium-and long-term investment opportunities

Reporter from China Fund News:Amura HThe stock premium index is still at an all-time highMany investors are optimistic about the investment opportunities of Hong Kong stocks. What do you think of this? Is this the time to lay out Hong Kong stocks?

Zeng Peng:The investment opportunity in the Hong Kong stock market is not because the valuation is lower than that of A-shares, nor is it entirely because of the return of Chinese-listed stocks. The southward movement of capital is also one of the many driving variables for Hong Kong stocks. In the long run, the Hong Kong stock market will emerge from the long-term structural market under the leadership of the China New economy Corporation, which is mainly different from that of the past in several aspects.

First, the macro-political environment has changed. The Hong Kong market has benefited from taking the lead in controlling the COVID-19 epidemic and the return of overseas manufacturing orders, and China has become the only major economy in the world to achieve positive economic growth, which are an important macroeconomic basis for the rise of Hong Kong stocks.

Second, from the perspective of liquidity, both internal and external angles are strengthening the capital supply of Hong Kong stocks. First of all, southward funds benefited from the continued hot sales of domestic public offering funds, and domestic institutional investors began to allocate high-quality Chinese assets through Hong Kong Stock Connect, which is significantly different from the craze of Hong Kong stocks dominated by domestic individual investors in 2015. Secondly, due to the continued excess currency issuance in the United States, the major stock indexes of the United States continue to hit record highs. Under the background of the strengthening of China's economy and the appreciation of the RMB, its spillover liquidity has also entered the Hong Kong stock market.

Third, from a long-term point of view, the core of determining whether a market has long-term investment opportunities lies in the listing of high-quality companies. The Hong Kong stock market is gradually becoming an important listing place for China's new economy enterprises. in recent years, booming digital economy, cloud computing, short video, online education, medical innovation and consumer innovation enterprises in mainland China have accelerated their entry into the Hong Kong stock market; at the same time, Hong Kong stocks have also accepted the secondary listing of a number of high-quality US-listed Chinese stocks due to geopolitical factors. The supply of high-quality Chinese innovative enterprises has significantly enhanced the attractiveness of the Hong Kong stock market. More importantly, the strong fundamentals of China's economy provide an important basis for the sustained growth of these enterprises' performance, so it attracts the common allocation of domestic and foreign investors.

Therefore, it is expected that this round of rise in the Hong Kong stock market will be a trend of long-term investment opportunities, led by the China New economy Corporation out of the long-term structural market.

Bo Yang:Because of the long history of development, the Hong Kong stock market has basically formed an absolutely dominant pattern of institutional investors, and the trading impact of retail investors is relatively limited. Moreover, Hong Kong stocks are a typical offshore market, with both ends out, so their valuations are quite different from those of A-shares. We can compare Hong Kong stocks with a variety of measures. Hong Kong stocks are obviously cheaper than A shares and also cheaper than US stocks. A more direct comparison is to look at the price difference of AH shares, that is, the price difference of exactly the same companies listed in two places. The long-term average premium for A-shares is about 25%, which means Hong Kong stocks are about 20% off. At present, the A H share price gap is still about 40%, which means that Hong Kong stocks are still in a position of a 30% discount on A shares.

There are many reasons behind this, the most important of which is the relationship between supply and demand. Although the two places have achieved interconnection, equity can not be exchanged at will. As the investment target of funds in the A-share market is relatively limited, its investors are more willing to pay a high premium. On the other hand, most of the investors in Hong Kong stocks are international institutional investors, and their investments cover the whole world, including the United States, Europe, Japan, Hong Kong, China, and other emerging markets, as well as A shares after the opening of the Shanghai and Shenzhen Stock Connect. So they can choose investment targets in a wider range. As a result, Hong Kong stocks did not receive a special premium. So the valuation gap is mainly due to differences in market style and liquidity.

So, is this a good time to lay out Hong Kong stocks? Even after the structural bull market in 2020, the overall valuation of Hong Kong stocks is still at a relatively reasonable level, and it has obvious advantages compared with A-share valuations. long-term strategic increase of domestic southward capital holdings in Hong Kong stocks and loose monetary environment in the United States, it should be a high-probability event for Hong Kong stocks to outperform A-shares in 2021.

Cheng Yun:Although the current premium rate of A / H shares has dropped to a certain extent from its peak in the fourth quarter of 2020, it is still at a historically high level, which does show the valuation advantage of Hong Kong stocks. But on the other hand, investors are advised to pay attention to the medium-and long-term investment opportunities of Hong Kong stocks' China core assets, especially the core assets of the new economy, because these assets are the companies most likely to enjoy the dividends of China's economic transformation and are relatively stable and highly profitable. After the stock price adjustment after the Spring Festival this year, the match between its valuation and earnings has become reasonable, and the medium-and long-term investment value has been revealed.

Zhu Dan:AH premium is a normal phenomenon, behind which there are some structural reasons, such as Hong Kong stocks can be shorted without rising or falling, and the risk is greater than A shares. But the AH premium hub has been around 20 per cent over the past decade and is now more than 30 per cent. The mean return alone means that Hong Kong stocks have more potential to rise than A shares.

Of course, our bullish view on Hong Kong stocks this year is not only based on the AH premium, but also on the following more important reasons:

First, the profits of Hong Kong stocks will rise in 2021. Hong Kong stocks are a typical profit-driven market, and the market usually performs well in the earnings upward cycle. The epidemic in 2020 has brought a profit pit for Hong Kong stocks, and both Chinese stocks and Hong Kong local stocks will usher in a strong profit repair in 2021.

Second, the valuation of Hong Kong stocks will be repaired in 2021. In the past two years, with the listing of Hong Kong stocks by New economy companies (including the secondary listing of many US stocks ADR back to Hong Kong), the proportion of new economy components represented by TMT and biomedicine has been increasing, and the valuation center of Hong Kong stocks has moved up accordingly. This year, Douyin Kuaishou Technology, Baidu, Inc. Baili and others will be listed in Hong Kong and included in the mainstream index, and the rising trend of Hong Kong stock valuations will continue.

Third, the mood and liquidity of Hong Kong stocks will improve in 2021. In the past few years, Hong Kong stocks have been mistakenly killed because of a series of black swan incidents (political turmoil, Sino-US trade war, COVID-19 epidemic). This year, Sino-US relations have eased marginally, and foreign capital has shifted from outflows of Hong Kong stocks to inflows. At the same time, southward funds also saw the advantages of the bridgehead of the new economy of Hong Kong stocks, and began to flow in on a large scale. The resonance of the two financial forces will further boost the Hong Kong stock market.

Hu Yaosheng:From the perspective of medium-and long-term cycle, the Hong Kong stock market still has large investment opportunities. From the perspective of individual stock mining, we need to grasp the triangular relationship between investment logic, performance and valuation. On the one hand, the prosperity of some consumer, pharmaceutical, Internet and other industries is still in the upward process, with certain industry beta attributes, scarcity is still high, although the valuation is relatively high in the short term, but the growth of future earnings can still match the expansion of valuation. On the other hand, the current valuation of the Hang Seng Index, represented by traditional value stocks, is still low and there are still investment opportunities for valuation repair. At the same time, the different pace of recovery of the global economy has led to a greater tendency for global capital to allocate Chinese assets, while the continued inflow of southward capital can also continue to provide liquidity support for the Hong Kong stock market.

对2021Hong Kong stocks are optimistic in 2000Pay attention to liquidity and policy risk

Reporter from China Fund News:How to look at the investment opportunities of Hong Kong stocks this year? What are the positive and negative factors?

Bo Yang:In the past, at present and in the future, there are two obvious changes in the Hong Kong stock market, one is the change in volume, the other is the change in structure. First of all, the Hong Kong stock market is a booming market, the volume is constantly increasing, and now the volume has reached 47 trillion Hong Kong dollars, which is about 50% of the total market value of A-shares in Shanghai and Shenzhen. In addition, Hong Kong stocks are also a very active market for IPO. The HKEx has been ranked among the top three in the total amount of IPO in the world for many years in a row, among which it has been the largest exchange in terms of IPO financing in the world for several years. Recently, we have benefited from the general trend of the return of US-listed stocks, so we can take a high view.

Structurally, because of the different listing rules between Hong Kong and the mainland, as well as some reasons of historical evolution, a considerable number of high-tech enterprises can only choose to be listed in Hong Kong under the existing limited conditions. for example, enterprises with different rights of the same shares and temporarily unprofitable biotechnology enterprises with the prefix B. This has led to the gathering of a large number of very dynamic TMT and biomedical enterprises in the Hong Kong stock market. According to GICS's industry classification, the proportion of the "new economy" in the Hang Seng index has increased from 16 per cent five years ago to 39 per cent now. From this point of view, Hong Kong stocks are expected to become China's version of NASDAQ in the future.

Zeng Peng:The Hong Kong stock market is divided into Hong Kong stock market and non-Hong Kong stock market. Among them, in the Hong Kong stock market, we need to focus on the high-quality Chinese enterprises represented by the Hang Seng Science and Technology Index and the actual production and operation entities in the mainland.

First of all, the Hong Kong stock market is becoming the cradle for the listing of new economy enterprises represented by China's digital economy in the past decade or so. at the same time, with the changes in Sino-US relations, the Hong Kong stock market has become an important listing place for high-quality new economy enterprises in the primary market. at present, all six major Chinese Internet enterprises are about to be listed in Hong Kong stocks. Hong Kong stock market is undoubtedly the year of IPO. Hong Kong stocks will become the main battlefield of China's new economic investment in the future. Secondly, the Hong Kong stock market as a whole will usher in the inflow of southward capital and foreign capital, and the trend of foreign capital inflow into Hong Kong stocks will not change. Third, the political fundamentals of Hong Kong stocks have improved significantly. Fourth, since Hong Kong stocks are priced in Hong Kong dollars and the Hong Kong dollar is linked to the US dollar, investing in Hong Kong stocks also helps to spread the risk of RMB depreciation against the US dollar. The investment opportunities of the Hong Kong Stock Connect will be long-term and sustainable.

Cheng Yun:The core factor determining the direction of the Hong Kong stock market is corporate profits. without profits, it is difficult to have a bull market. The role of other elements is only to amplify or weaken the market direction and range of changes determined by corporate profits. The current round of Hong Kong stock market began with the inflection point of corporate profits in the fourth quarter of 2020, and the market adjustment after the Spring Festival stems from the weakening of earnings prospects.

Among them, the sharp rise in global commodity prices (upstream raw materials), represented by crude oil and copper, has not only damaged the overall profit prospects of Chinese manufacturing companies, but also triggered inflation expectations, thus pushing up interest rates on US debt. From the perspective of medium-and long-term supply and demand fundamentals, its prices are already above the long-term equilibrium price, and there may not be enough momentum for further upward movement in the future. In terms of long-term US bond interest rates, the period of rapid rise in US bond interest rates may be over, and liquidity in the Hong Kong stock market is expected to remain abundant before the Fed begins to guide QE out of expectations.

From a risk perspective, the most noteworthy factors include Sino-US relations, global epidemic control, commodity prices, and the shift in Fed monetary policy.

Hu Yaosheng:Since the market has fluctuated greatly since the beginning of this year, and the performance-to-price ratio of game trading is not high, we focus on taking a long-term view. Since we have no way to buy a large number of shares of a company at an undervalued valuation at present, to obtain a sufficient margin of safety, then we should study and judge the fundamental factors such as the company's profitability, competitiveness, prosperity, and industry development trend in the next 3-5 years. Look for industries and companies that can lead significantly in the future.

As the participants in the Hong Kong stock market are institutional investors around the world and have a wealth of investment tools, short hedging is the norm. Therefore, from an allocation point of view, global capital flows and Sino-US monetary policy are the main risks to be considered at present.

Zhu Dan:We maintain an optimistic judgment on the Hong Kong stock market this year, and the Hang Seng Index has fallen to a better allocation position in the short term. Now the risks are more up than down.

In the short term, the external bearish factor of the surge in US bond interest rates has eased at the margin. At one point, the surge in interest rates on US debt at the beginning of the year led to a sharp fall in high global valuations, especially in technology stocks, and Hong Kong stocks were no exception. However, after April, the upward momentum of US bond interest rates weakened, and even high levels fell, and the period of the most drastic adjustment in Hong Kong stock valuations has passed.

In the medium term, the allocation of southward funds to Hong Kong stocks has just begun, and Hong Kong stock capital bulls are in the initial stage. According to new data from public offering funds over the past few years, it is speculated that at least trillions of dollars will flow into Hong Kong stocks in the next few years. This does not include insurance funds, annuities and other long-term funds.

In the long run, we are optimistic about the new economic changes in Hong Kong stocks. At present, domestic new economic leaders such as Tencent, BABA, Meituan, XIAOMI, Kuaishou Technology, Baidu, Inc. and Baili have gathered in Hong Kong stocks. Douyin will also be listed soon. Hong Kong stocks have become the bridgehead of China's new economy. China's version of NASDAQ Changniu market is most likely to be born.

Of course, Hong Kong stocks also have two negative factors to be wary of this year: one is the state's anti-monopoly supervision of technology giants. At present, BABA's boots have fallen, but Tencent, Meituan and so on are not clear. The regulated sword of Damocles could suppress the mood and valuations of tech giants in the short term.

The second is the domestic credit crunch environment. The tone of our monetary policy this year is "no sharp turn", but it is still a U-turn after all. Recently, the debt risks of some central enterprises and urban investment have been exposed, and the overall domestic credit environment is tight, which will also be transmitted to Hong Kong stocks through southward funds.

Scarce targets, new economy, bio-pharmaceuticals and so on are expected.

Reporter from China Fund News:What are the industries or sectors that Hong Kong stocks are more concerned about at present?

Zeng Peng:Specific to the sector, optimistic about the components of the Hang Seng Science and Technology Index, including the Internet, cloud computing, digital economy, biomedicine, electronic information, semiconductors and other industries.

Bo Yang:Because of the different listing rules and market development history between the two places, the Hong Kong stock market has many high-quality investment targets that are relatively scarce in the A-share market. Many high-quality stocks not only have sustained and stable endogenous growth, but also have the potential to gradually increase their valuations after the continued interconnection between the two places. In fact, they are of great long-term investment value. For example, a number of Internet giants, exchanges, gambling stocks and so on.

With the return of Chinese stocks, many companies that were originally listed in the United States are seeking secondary listings in Hong Kong. A number of Internet giants have successfully returned to Hong Kong for listing, injecting fresh blood into Hong Kong stocks. There are also some high-quality companies listed on both the Hong Kong stock market and the A-share market, but they are traded at a lower price in Hong Kong, which is also an investment target worth considering.

Cheng Yun:In terms of industry allocation and stock selection, in the current market environment Mainly optimistic about service consumption (including games, e-commerce, catering, takeout, property management, etc.), consumption (including sporting goods, dairy products, beer and spirit leaders), new energy, (mainly electric car industry chain), computers (mainly SAAS and cloud computing), electronics (mainly leading companies with a partial increase in share) and financial industries (mainly insurance and banks).

Zhu Dan:Technology stocks that were oversold in the early days. After the Spring Festival valuation killed a wave of bubbles, as long as the long-term fundamentals are all right, the risk-return ratio of this position is higher. Short-term antitrust regulation suppresses sentiment and also provides a better buying point.

Upstream resource goods and downstream consumer goods with the ability to raise prices. Global commodity prices have risen significantly this year, which is good for upstream resources industries, such as non-ferrous metals, coal, steel and so on. The CPI-PPI scissors gap narrowed, hurting mid-stream profits, such as cars, machinery and so on. However, companies with brand power and price raising ability can still complete the cost transfer and grab more market share in this round of general rise in raw materials.

The farming sector. This year, environmental production restrictions and plague recurrence have further increased the concentration of pig farming and other industries. The epidemic has given birth to an outbreak of raw milk demand, which is also good for dairy farming enterprises with high-quality pasture resources. Hong Kong stocks these aquaculture companies currently have low valuations and high odds.

Sectors with greater exposure to external demand. The progress of vaccination in Europe and the United States is relatively rapid, and the recovery of overseas demand this year is a relatively certain event. At this time, we can arrange some companies with large exposure to external demand, such as Hong Kong stocks' global leader PC manufacturer, furniture leader, and so on. The maritime shipping sector will also benefit from the recovery in global trade and continue the good performance in the second half of last year.

Hu Yaosheng:On the one hand, traditional industries have investment opportunities for continuous valuation repair, and the trend of various industries is clearly divided in 2020. After global liquidity reaches a new high, consumption, medicine, and technology fully benefit from higher valuations. With the continuous recovery of the global economy, the valuations of traditional value stocks and cyclical stocks have a trend of mean return, and they will come out of a phased independent market in 2021. On the other hand, optional consumption, Internet science, medicine and other industries still have beta attributes, thanks to its sustained high growth, profit growth to a certain extent after digesting the valuation, is still the direction of medium-and long-term key allocation.

In addition to the performance, we should pay more attention to the allocation ratio of Hong Kong stocks.

Reporter from China Fund News:Is it a good way to invest in Hong Kong stocks through funds? How should it be screened? Where is the risk?

Bo Yang:Ordinary investors to participate in Hong Kong stocks, through public offering funds is a better choice. The performance of Hong Kong stocks is likely to exceed that of A shares this year, but due to the convergence of China and the West in Hong Kong, Hong Kong stocks are quite different from A shares in terms of market composition and trading methods, so the Hong Kong stock market is actually a relatively complex place.

First, in terms of fundamentals, Hong Kong stocks are actually a platter. Companies that account for about 2% of the market capitalization mainly operate in mainland China; in addition, some operate globally, such as several global financial giants; there are also some stocks that belong to Hong Kong. Therefore, investors need to have the ability to understand a wide range of fundamentals.

Second, the Hong Kong dollar is an asset linked to the US dollar, and the main investors in Hong Kong stocks are institutional investors. for quite a long time in the past, Hong Kong stocks were dominated by institutional investors in Europe and the United States. Moreover, with the deepening of the interconnection mechanism, Chinese-funded institutions already in Hong Kong and southward funds are playing a more and more important role in the investment transactions of Hong Kong stocks. Therefore, to look at the liquidity of Hong Kong stocks, we need to add the liquidity of funds at home and abroad on the basis of analyzing the global liquidity. Therefore, the Hong Kong stock market is not simple, the so-called "shallow pool and deep tricks".

Cheng Yun:As the trading mechanism, investment concept and investment style of the Hong Kong stock market are obviously different from those of the A-share market, domestic investors who are accustomed to the A-share environment may face challenges to invest in Hong Kong stocks directly. Therefore, borrowing fund investment is a better way for ordinary investors to invest in Hong Kong stocks.

With regard to the selection of Hong Kong stock funds, on the one hand, it is relatively conventional, depending on long-term performance and selecting funds with outstanding long-term performance. On the other hand, Hong Kong equity funds need to pay special attention to the proportion of Hong Kong equity funds that actually invest in Hong Kong stocks.

According to the regulations, if the current fund name contains similar words such as "Hong Kong stocks", more than 80% (including) of non-cash fund assets should be invested in Hong Kong stocks. However, for some old products, such as Shanghai, Hong Kong and Shenzhen funds or other funds that do not specifically mark Hong Kong stocks in their names, the proportion of Hong Kong stocks may be more flexible, and some investment in Hong Kong stocks may be relatively low. If you want to judge the proportion of such funds investing in Hong Kong stocks, you can examine the correlation between the net worth of funds and the trend of Hong Kong stocks. Funds with high correlation can better help you grasp the opportunities of Hong Kong stocks.

Zhu Dan:Investors may use broad-based Hong Kong stock funds to seize investment opportunities in Hong Kong stocks. The old and new economies are more balanced, more defensive than the pure technology index, more offensive than the cyclical index, offensive and defensive, and the overall risk-adjusted long-term performance is better.

Hu Yaosheng:Because the investment opportunities for Hong Kong stocks are mainly concentrated in the new economy and traditional big consumption areas, investors can choose Hong Kong Stock Connect funds with clear themes, such as consumer theme, Internet science and technology funds, and so on. This kind of fund not only has distinct investment direction and characteristics, but also can enrich the choice of investors.