Source: Broker China
Author: Promise
Preventing public funds from being forced to sell stocks in accordance with fund contracts has become a positive driving force for many Hong Kong digital economy stocks to continue to be released.
With only 40 days left until the latest round of approval of the Hong Kong Stock Connect standards, digital economy circuit stocks that have fallen sharply and jeopardized the “Hong Kong Stock Connect” status with market capitalization conditions of HK$4 billion are relying on favorable business progress and repurchases to stimulate stock prices. The status of Hong Kong Stock Connect is a key factor for many Hong Kong stock listed companies to maintain liquidity and valuation, and to absorb purchases from public funds, especially Hong Kong Stock Connect themed funds.
A reporter from brokerage China noticed that at present, many digital economy circuit stocks have dropped from a market value of HK$10 billion to less than HK$3 billion, and some even have only HK$2 billion left. Although they are still on the Hong Kong Stock Connect list, if the stock price fails to meet the requirements at the end of June this year, it is likely that they will lose their Hong Kong Stock Connect status. According to Hong Kong stock rules,$Hang Seng Composite Index (800701.HK)$There will be regular adjustments every six months. The end of June and the end of December are the data deadlines. If the average market value of Hong Kong Stock Connect stocks at the end of December falls below HK$4 billion, they will be transferred out of Hong Kong Stock Connect. Under Baotong's power, some stocks rose more than 100% within 5 months to meet the standard, and some of the Hong Kong Stock Exchange Standard with market capitalization falling below 4 billion dollars also stimulate the rise in market capitalization.
On the digital economy circuit, buying early is not as good as buying smart
On May 20, the Hong Kong stock digital economy circuit soared across the board. Various segments such as digital industrialization, digital health, and digital sports showed the highest gains. Among them, digital industrialization varieties$AINNOVATION (02121.HK)$increased by 12.4%,$SENSETIME-W (00020.HK)$Up more than 12.14%, digital sports$KEEP (03650.HK)$Up more than 13%, digital entertainment platform$XD INC (02400.HK)$Up about 9%, the digital health track's$CLOUDR (09955.HK)$An increase of more than 6%.
As risk appetite in the stock market continues to rise, and public funds move southward and foreign-funded institutions support Hong Kong stock liquidity, the market on the Hong Kong stock digital economy circuit is attracting more and more attention from fund managers, even though fund managers have previously lost quite a bit on the Hong Kong stock digital economy circuit.
Take the digital health circuit as an example. Due to the acceleration of aging, the addition of AI technology, internet penetration, and huge population size, it has gradually become a golden outlet comparable to electric vehicle racing tracks and new energy sources. However, the many segmented participants within the racetrack and similar business models have also caused the digital health circuit to largely face internal problems with electric vehicles and new energy sources. As a result, most companies listed on the Hong Kong Stock Digital Health Track have experienced huge declines.
A Chinese reporter from a brokerage firm noticed that a public fund in Shanghai had previously begun to invest heavily in the field of AI digital medicine at the “bottom”$YIDU TECH (02158.HK)$The latter helps pharmaceutical companies improve drug development accuracy and clinical efficiency through artificial intelligence algorithms. At the same time, Yidu Technology also revealed that the AI diabetes digital therapy products developed by the company were approved by the US FDA. However, amid fluctuations in the “bottom” of the Hong Kong stock market, a Shanghai-Hong Kong-Shenzhen themed fund manager in Shanghai still left the market with a loss of about 40%.
However, for many fund managers, the Hong Kong stock market often shows that buying early is not as good as being smart. Take the digital entertainment platform Xindong as an example. Last year, more than 10 public funds bought the Hong Kong digital entertainment platform Xindong, but after experiencing a nearly 50% drop in stock prices, most of these fund managers cut their positions. In the end, as of the end of March this year, there were only two fund products left of Heavy Duty, and Xindong, which is heavily invested by these two funds, has accumulated a cumulative increase of more than 100% over the five months since this year. It is worth mentioning that these two funds, which have doubled their share price for 5 months on a single stock, are not actually “long-term investors” of Xintong Company. According to information disclosed by the fund company, Xindong is a newly invested stock for these two funds in the first quarter. This means that when more than 10 funds sold their shares at the end of last year and the beginning of this year, the stock price of Xindong Company also basically bottomed out. At this point, the above two funds “happened to” be bought where other fund managers cut corners.
The above information means that the accuracy of fund managers' investment in Hong Kong stocks almost depends on the “two in one” of bottom and market risk. After digital economy circuit stocks experienced a huge decline and experienced a bullish sentiment in the market, the strategic aggressiveness of Hong Kong stock themed funds on the digital economy circuit also greatly increased.
Losing Hong Kong Stock Connect status or forcing public offerings to sell
Behind the boom on the digital economy circuit, there is also a “security” factor that public fund managers are very concerned about.
In an interview, a reporter from brokerage China learned that Hong Kong Stock Connect is the core channel for maintaining liquidity and valuation of many stocks on the digital economy circuit, but most products related to the digital economy circuit have declined by 70% to 90% over the past year, and the market value of many companies is already substantially lower than the standard of Hong Kong Stock Connect. According to Hong Kong stock rules, the Hang Seng Composite Index is adjusted regularly every six months. The data cutoff dates are June and the end of December, respectively. Hong Kong Stock Connect stocks within Hang Seng's small-cap stocks will be transferred out of Hong Kong Stock Connect if the average market value of Hang Seng's small-cap stocks falls below HK$4 billion at the end of the previous month of December.
According to the agreement on the scope of stock investment in the relevant contract of the Hong Kong Stock Connect Themed Fund, non-Hong Kong Stock Connect stock positions are generally not less than 80% of the fund positions. In particular, when the relevant stocks lose their Hong Kong Stock Connect status, they will also suppress stock prices and valuations. Once removed from the Hong Kong Stock Connect list after June of this year, it is likely that Hong Kong Stock Connect themed funds under the public offering will be forced to sell due to factors such as fund contracts and liquidity.
Currently, Zhiyun Health, Innovation and Wisdom, which are still on the Hong Kong Stock Connect list$MEDSCI (02415.HK)$,$TONGDAO LIEPIN (06100.HK)$The market value of digital economy stocks was still below HK$4 billion as of May 20, making “Baotong” attracting fund managers to maintain valuations the key to interpreting current market conditions. In this context, some listed companies facing “maintenance” pressure continued to announce favorable stock repurchases and business progress. On May 20, the digital sports technology company Keep issued an announcement announcing that it would launch a stock repurchase plan with an amount of no more than HK$100 million. This announcement stimulated a 13% surge in stock prices on the same day, and the market capitalization also broke through the Hong Kong Stock Connect standard of HK$4 billion.
The core of the digital economy circuit lies in the integration of AI technology
Regarding investment opportunities on the digital economy circuit during the year, many fund managers focused on the integration and application of the digital economy and AI (artificial intelligence) artificial intelligence technology.
Wang Bo, manager of the Southern Digital Economy Fund, believes that the digital economy and AI industry are currently in a development trend. Different branches are in different life cycle stages, such as technology verification stage, application implementation stage, and practical stage that can greatly improve productivity. When choosing investment targets, on the one hand, it is necessary to screen various segments to determine the space and time and path of implementation of industry trends; on the other hand, it is necessary to find enterprises that can continuously implement implementation and prove their ability from the perspective of secondary market investment. In the field of “artificial intelligence +” investment, the primary focus is on computing power, the core of AI infrastructure. Furthermore, investors should pay some attention to AI application scenarios that can significantly promote productivity development, such as generative AI, autonomous driving robots, etc.
He believes that from the perspective of long-term industrial development, the digital economy and AI are expected to reshape human life and work models within 10 years. Currently, AI-assisted decision-making is closer to providing answers based on past experience and data probability, and logical thinking ability needs to be improved. In the future, breakthroughs and improvements in AI logical thinking and long-term accumulation in the technology industry may bring about a blowout in AI technology applications, and may create new investment opportunities.
Liu Rongjun of Jinxin Foundation believes that the development of the digital economy can reduce production costs, improve product quality, speed up transactions, and save human resources, thereby improving the efficiency of economic operation, and that the application of digital technology will bring new business models, new products and services, and new economic growth points and employment opportunities. The emergence of new industries, new business formats, and new models will further promote economic innovation and development. Since this year, the continuous iteration of technology and innovative breakthroughs in the field of artificial intelligence have made investors unabated. Currently, tech giants are speeding up the deployment of big models of artificial intelligence and their applications. A new round of technological change is coming at an accelerated pace, and commercial application scenarios for artificial intelligence in various industries are being further expanded and deepened. At the same time, the training and reasoning of large AI models will place higher demands on computing power infrastructure, which will also place greater demand on data centers and related supporting industries. The rapid development of the artificial intelligence industry and rapid changes in AIGC technology have opened up endless room for imagination for the development of the digital economy. Although the industry is developing rapidly, there are still many areas that need to be improved, and there are also issues involving data leakage, cybersecurity, legal boundaries, and industry supervision that need to be solved urgently, but we believe that the major trends in industry development will not change.
Zhao Shihong, manager of the Pengyang Digital Economy Pioneer Fund, pointed out that this year's digital economy industry trends and high-quality companies with medium- to long-term prospects are the core of investment. In particular, benefiting from the direction of artificial intelligence industry trends, judging that the domestic economy will eventually recover better, policies are more willing to take care of the capital market, and the overall market valuation is currently low, while the computer and electronics sector is currently clearly outperforming the market, and internal recovery momentum is strong. In addition, there are expectations of interest rate cuts in overseas markets this year.
Editor/jayden