The Hong Kong market is picking up fast!
In the past few days, Hong Kong stocks have been very strong. In early trading today, the three major indexes of Hong Kong stocks opened higher across the board, with the Hang Seng Index up 1.02%, the Hang Seng Technology Index up 1.74%, and the Hang Seng China Enterprises Index up 0.96%. Technology stocks rose, JD.com (09618.HK) rose nearly 5%, NetEase (09999.HK) rose nearly 2%, Weibo (09898.HK), Tencent Holdings (00700.HK) and others followed suit.
At the same time, heavy benefits have also come one after another.
First of all, last Friday, the China Securities Regulatory Commission (CSRC) announced five measures for cooperation with Hong Kong, including the relaxation of the scope of ETF products, the inclusion of REITs, the support of RMB trading counters, the enhancement of mutual recognition of funds, and the smoothing of listing and financing channels. The new rules will help smooth the Stock Connect mechanism, introduce capital and enhance liquidity in Hong Kong's capital market.
Second, in early trading today, according to a report learned by brokerage China reporters, UBS upgraded Chinese mainland and Hong Kong stocks to overweight, and downgraded Taiwan and South Korea stocks to neutral. In addition, UBS upgraded Chinese stocks to overweight, saying that the consumer and internet sectors are highly weighted in the MSCI China Index and are expected to perform better as consumption shows initial signs of recovery.
Third, the Asia-Pacific foreign exchange shock has gradually subsided. In early trading today, during the speech of Bank of Japan Governor Kazuo Ueda, the yen gradually strengthened, and the dollar index began to fall. The recent volatility in the peripheral financial markets appears to be showing signs of converging.
The living water of Hong Kong stocks
In the past two days, Hong Kong stocks have been much stronger than A-shares, and the main reason for this is because of last Friday's good news. Yesterday, Tencent Holdings rose more than 5%, and this morning it rose again by more than 2%, largely due to the reason for better liquidity.
Last Friday, the China Securities Regulatory Commission (CSRC) announced five measures for cooperation with Hong Kong, including the relaxation of the scope of ETF products, the inclusion of REITs, the support of renminbi trading counters, the enhancement of mutual recognition of funds, and the smoothing of listing and financing channels. The new rules will help smooth the Stock Connect mechanism, introduce capital and enhance liquidity in Hong Kong's capital market.
Huatai Securities said that at present, there are 8 Hong Kong Stock Connect ETFs, with a total fund size of HK $191.5 billion, and the number of Hong Kong Stock Connect ETFs under the new regulations is expected to expand to 21 and the fund size will increase to HK $245 billion (original rule comparable: 14 / HK $237 billion). At the same time, the new regulations include REITs in the Stock Connect for the first time, and 3 of the 11 REITs in Hong Kong may meet the inclusion criteria in terms of average circulating market capitalization, liquidity and other indicators in the previous 12 months.
Guotai Junan believes that the lower threshold for the inclusion of ETFs in Stock Connect will help significantly increase the number and scale of targets, and the inclusion of RMB counters in Hong Kong Stock Connect will attract more RMB funds to flow into the Hong Kong stock market and further enhance the trading activity and trading scale of Hong Kong stocks. In addition, the introduction of the market making mechanism, combined with the stamp duty reduction, will increase the enthusiasm of market makers to participate in arbitrage and increase the activity of Hong Kong stock trading. At present, the average daily turnover of REITs on the Hong Kong Stock Exchange is low, and the inclusion of REITs in the Stock Connect will attract domestic and foreign capital inflows and enhance market liquidity.
Foreign investors are bullish on the stock market
In early trading today, UBS upgraded Chinese mainland and Hong Kong stocks to overweight and Taiwan and South Korea stocks to neutral.
UBS Group AG upgraded Chinese mainland and Hong Kong equities to overweight according to the report, citing strong earnings despite concerns about China's property and macro conditions. "The largest stocks in the China index generally performed well in terms of earnings/fundamentals. As a result, China's underperformance is purely due to a collapse in valuations. Strategists such as Sunil Tirumalai wrote in a note on Tuesday.
In addition, UBS upgraded Chinese stocks to overweight, saying that the consumer and internet sectors are highly weighted in the MSCI China Index and are expected to perform better as consumption shows initial signs of recovery. UBS pointed out in the report that China's holiday consumption data is strong year-to-date, listed consumer goods companies are performing better than overall consumption in the economy, and any rebound in consumer confidence means that household savings are likely to flow to consumption and markets, making UBS more optimistic about corporate earnings.
The brokerage is funding China's rating upgrades by downgrading Taiwan and South Korea to neutral, as optimism in tech stocks is being priced in given the sector's "highest premium relative to the rest of the world in a decade," the strategy analysts said.
In March this year, foreign giant Morgan Stanley said in its latest report that global funds are returning to the Chinese stock market. As the bearish sentiment on the Chinese market has eased in some funds, the withdrawal of global long-term investors from the Chinese equity market (A-shares and Hong Kong stocks) has hit the pause button. Hitting the pause button could be an early sign that overseas money managers are rethinking their asset allocations across the region. At that time, the significance of the indicator was very clear.
On April 14, Goldman Sachs released its latest report, pointing out that in view of the more favorable policy sensitivity and compelling liquidity dynamics of the A-share market, it maintains a strategic optimism about the A-share market, and expects A-shares and H-shares to have a potential upside of 12% and 8% respectively in the next 12 months.
Volatility in the foreign exchange market converges
Recently, volatility in the foreign exchange market has become a source of volatility in the global equity market. The U.S. dollar index continued to rise, putting a lot of pressure. Recently, however, that pressure has waned.
First of all, from the perspective of international oil prices, the source of the US dollar, the increase has slowed down. U.S. President Joe Biden's legislation to tighten sanctions on Iranian crude is expected to become law as early as this week, but he is likely to be cautious about using his new powers. Oil market analysts say Biden will be reluctant to take any steps that could raise the price of crude oil or gasoline. Policy experts say Biden may use the immunity from sanctions provisions to avoid strict enforcement of sanctions.
Secondly, from the perspective of the yen, this morning, the governor of the Bank of Japan finally showed up to confront the concerns of the outside world. He said monetary policy will depend on the economy and inflation. If inflation moves towards 2%, the degree of easing will be adjusted. There are no preconceived ideas about the timing and pace of future rate hikes. If the acceleration of trend inflation is in line with forecasts, the level of monetary support will be adjusted by raising interest rates. For the time being, accommodative monetary policy conditions will need to be maintained for some time. Against this backdrop, the yen's depreciation was able to be curbed today. Most non-US currencies also appreciated.
Finally, from the perspective of the renminbi, the renminbi has actually been relatively strong recently. According to the CITIC Securities research report released today, since the beginning of 2024, the RMB exchange rate has maintained a stable and weak operation, with a cumulative depreciation of 1.97% against the US dollar as of April 19. The main reason was that the US employment and inflation data exceeded expectations, which led to a cooling of Fed rate cut expectations and the strengthening of the dollar index. It is expected that the Fed will only cut interest rates about once this year, and the European Central Bank may take the lead in cutting interest rates, and the widening of interest rate differentials between the United States and Europe will support the strength of the dollar, thereby putting depreciation pressure on the yuan. However, this year, the central bank has sufficient foreign exchange management tools, and has the willingness and ability to maintain the stability of the exchange rate, and even a slight depreciation in the second and third quarters of this year will not exceed 7.35.
Editor-in-charge: Wang Lulu
Proofreading: Wang Chaoquan