After the China Securities Regulatory Commission issued new measures for cooperation with Hong Kong, Hong Kong stocks have risen sharply for three consecutive days. Technology stocks led the rally today, buoyed by a number of positive news and expectations of general optimism about corporate earnings.
On Wednesday, April 24, the Hong Kong stock market opened higher again, the Hang Seng Index broke through and stood above 17,000 points, and joined hands with the Hang Seng China Enterprises Index to hit a new closing high in the past five months, and technology stocks collectively strengthened for the third consecutive day, with the Hang Seng Technology Index rising sharply by 3.61% and rising 8.2% in three days.
Specifically:
Meituan rose more than 17% in three days this week, regaining its foothold at HK$110, a new high since November 23, 2023;
Tencent rose more than 12% in three days to HK$340, a new high in more than nine months;
Kuaishou rose more than 17% in three days, Bilibili rose 14% in three days, JD.com rose 13% in three days, Alibaba rose 8.5% in three days, and Baidu rose more than 6% in three days;
The Hong Kong stock Internet ETF rose 10.87% in three days.
Favorable policy + low valuation
From a policy perspective, the China Securities Regulatory Commission (CSRC) last week launched five measures to support Hong Kong's capital market to support the performance of Hong Kong stocks, help improve the medium and long-term liquidity of Hong Kong stocks and provide incremental funds. Analysts at Guotai Junan Securities believe that the latest measures will continue to promote the inflow of mainland funds into Hong Kong, enhance their influence on the market, and contribute to price stability.
Guotai Junan pointed out that since the beginning of this year, the overall performance of China's economy has remained stable, especially since the beginning of the year, the PMI and trade data have been generally better than expected, which is conducive to stabilizing investors' confidence to a certain extent. The China Securities Regulatory Commission (CSRC) has issued five measures for capital market cooperation with Hong Kong, which means that policy support for Hong Kong stocks is gradually increasing, and attracting more mainland capital and institutional investors will be an important cornerstone for Hong Kong stocks in the future.
As of Wednesday, mainland investors have increased their holdings of Hong Kong stocks for 17 consecutive trading days, setting a record for the longest streak in history, and today's southbound funds continued to have a net inflow of HK$1.995 billion, with a cumulative inflow of HK$39.158 billion since April. So far this year, mainland investors have increased their holdings of Hong Kong stocks on all but 11 trading days.
Secondly, this week, the Hong Kong Monetary Authority is intensively injecting liquidity, and on April 22 and 23, it injected HK$525 million and HK$500 million of liquidity into banks through the discount window respectively. Since the beginning of this year, the Hong Kong Monetary Authority (HKMA) has repeatedly used the discount window to inject liquidity into banks, with a cumulative amount of about HK$6.897 billion.
Some analysts have pointed out that the Discount Window, as a standing Hong Kong dollar liquidity arrangement of the Hong Kong Monetary Authority, aims to ensure the smooth operation of the interbank payment system. This initiative demonstrates that the Hong Kong Monetary Authority (HKMA) plays an active role in maintaining the stability and liquidity of the financial markets.
From the perspective of valuation, the current expected price-to-earnings ratio of the Hang Seng Index at the end of 2024 is about 8.3 times, which is still at a low valuation level compared to the past history. In a recent report, UBS upgraded Hong Kong stocks to "overweight" due to the support of higher dividends for Hong Kong stocks and the recovery of tourism.
The MSCI China Index's EPS has fallen by only about 2% over the past 18 months, outperforming other emerging markets (-8%), according to UBS's preferred index-weighted EPS calculation. The largest constituents of the China index have generally performed well in terms of earnings and fundamentals.
The report also noted that UBS is now more optimistic about earnings as consumption is showing signs of recovery and stronger signals that household savings are gradually flowing into the market.
Optimism in corporate earnings is high
From the enterprise side, on the news side, Tencent officially announced that "Dungeons and Warriors: Origins" (DNF mobile game), which game fans have been waiting for for many years, will be officially launched on May 21.
In addition, the company's previously announced share repurchase plan of 100 billion Hong Kong dollars is regarded as an important positive, and Hua Chuang Securities believes that this will effectively offset the financial pressure caused by the reduction of shareholder holdings and have a positive impact on the stock price.
On April 10, Alibaba founder Jack Ma published a post entitled "To Reform and Innovation" on the company's intranet, highly affirming the courage of the new management composed of Tsai Chongxin and Wu Yongming, saying that Alibaba has returned to the track of healthy growth and supports continued reform. This is the first time in five years since his retirement that Jack Ma has shared his thoughts on the company's reform and innovation and future prospects.
In addition, Alibaba announced on February 7 that it would raise the scale of share buybacks again, increasing the total buyback scale to US$65 billion, which is the largest buyback in the history of Chinese concept stocks. Founders Jack Ma and Joe Tsai also increased their holdings of Alibaba shares in the last quarter, underscoring their strong confidence in Alibaba's future development.
SenseTime releases the latest version of its SenseNova generative AI model. According to Xu Li, chairman of the company, the new model has significantly improved its language and creative capabilities, and has shown good performance compared with the world-renowned ChatGPT platform.
It is reported that many Hang Seng Index companies are expected to announce their performance reports for the first quarter of 2024 before the end of May, and earnings are expected to be the main driver of Hong Kong stocks in the coming weeks.
Specifically, on May 14, Tencent announced its first quarterly report, on May 16, Baidu announced its first quarterly report, and on May 22, Kuaishou announced its first quarterly report.
Tai Hui, Hong Kong-based strategist at JPMorgan Asset Management, said,
"[Previously] investors were very, very light and had quite conservative earnings expectations. ”
"I do think China's earnings have been doing well this year. So, the threshold for exceeding expectations is quite low, and that's where people are concerned. ”
This article is from Wall Street News, welcome to download the APP to see more