编辑/RockySource: Kevin's strategic research
Author: Liu Gang from China International Capital Corporation.
CICC stated that in this round of significant rise, there are no long-term foreign investors (Hold type, the most important), but there should be short-term foreign investors (such as passive funds, Trade funds). This time, overall it is still a structural market, and an even more extreme structural market, with only over 20% of Stocks outperforming the Index.
After a brief adjustment yesterday, the Hong Kong stock market surged again today, and afternoon real estate-related news also boosted the performance of real estate stocks. The market is focusing on the upcoming space, and we have updated several pieces of information below, based on some of the latest data, for your reference.
As of today (closing on February 12), the Hong Kong stock market is technically overbought overall (RSI at 74%), but the short sell transaction volume has decreased compared to previous days, indicating that some discrepancies are reducing or being forced due to the rise. The equity risk premium has fallen to 6.5% (the peak in May 2024 was 6.7%, and the peak in October last year was 6%).
So looking overall, the conclusion can be drawn that the sentiment is overstretched in the short term. But can it be considered extreme? Definitely not the most extreme; where is October's sentiment? If we take the excitement at the peak in early October and translate it, the Hang Seng Index could correspond to 23,000 points, which is not impossible but challenging.
So is there foreign capital buying in? Currently, the data we have can only reflect until the end of last week (this week's data will be updated on Friday). The conclusion is: there is no long-term foreign capital (holding type, most important), but short-term foreign capital (such as passive and trading funds) should exist. The biggest issue with the latter is that it is not sustainable, similar to the situation at the end of September.
There are a few interesting points about this surge, which can also be considered misconceptions. In fact, this overall market is still a structural market, and it is a more extreme structural market, with only over 20% of stocks outperforming the index (in 924 market, more than 60% of stocks outperformed the index). But relying on these small-range stocks to drive the overall index up and outperform A-shares is mainly due to: 1) the overall market size of Hong Kong stocks is small; 2) there are more software stocks and large companies in Hong Kong stocks, which are lacking in A-shares; 3) in terms of index construction, the Hang Seng series indices artificially limit the individual stock weight cap to 8%, which makes the pull of small and medium companies on the index more significant.
The next two paths are: first, continue structurally, the industry narrative is not falsified, at most a structural bull market can be created, similar to the smart phone and consumer electronics industries from 2012-2014, and semiconductors and new energy after 2019, or the seven sisters of the US stocks; however, this requires continuous industry realization as the basis. If it cannot be realized, there will either be speculation around this main line diluted into surrounding stocks, or tightly holding these large corporations that are most likely to realize.
Second, further diffusion to the overall market, but two conditions are needed: 1) Technology changes and resolves the overall macro deleveraging and contraction issues, resulting in a significant rise in total factor productivity and natural rates; 2) macro total policy coordination and strengthening, such as today’s real estate news, but now with the heat of AI and relatively mild tariffs, will this lead to macro policies not being overly urgent? Observations are needed.
Editor/Rocky
