In 2021, the Hong Kong stock market experienced many twists and turns, including Internet antitrust regulation, real estate debt default risk, overseas liquidity impact and Omicron epidemic impact. These factors made the Hang Seng Index and Hang Seng technology index perform poorly and lag behind other markets. Since this year. Although the performance of the Hong Kong stock market has not improved significantly, it has not affected the enthusiasm of southbound capital participation.
Since the beginning of 2022, the funds from Hong Kong stock connect to the South have continued to flow into Hong Kong stocks. Only the outflow was recorded on the first day of the year (January 4), continuing the strong capital inflow momentum since December last year and further accelerating.
As of January 26, 2022, the inflow of southward funds in the first month was 35.8 billion yuan. Due to the Spring Festival holiday, Nantong will be closed from January 27 and the service of Hong Kong stock connect will be resumed from February 7 (Monday).
Note: schematic diagram of monthly flow of southward funds in recent five years
As time goes on, the annual net inflow of southward funds to the Hong Kong stock market has continued in the past five years. Except for 2018, the net inflow in other years exceeded 100 billion yuan. According to the statistics of choice, by the end of December 2021, the net inflow of southward capital last year was 413.022 billion yuan, but it decreased compared with 672.1 billion yuan in 2020, and the growth rate slowed down.
Nanshui prefers Internet stocks
Half of the country’s Internet stocks are still favored in the buying of stocks. From nearly three months’ performance, technology stocks occupy almost half of the total, and Tencent holding, Kwai Mei and the US group are ranked the top five every month. In January alone, the US group, Tencent and Kwai Chi continued to stay in the top three, while Ganfeng Lithium Co.Ltd(002460) and China CNOOC became the top ten stocks in the new list.
According to statistics, the US group, Tencent holdings and Kwai Chi ranked the top of the list in January this year, buying 8 billion 947 million yuan, 4 billion 661 million yuan and 3 billion 25 million yuan respectively.
In December 2021, it was the same formula. The US group, Tencent holdings and Kwai Fu were the top three most frequently traded funds in the south, and they were bought 13 billion 708 million yuan, 8 billion 281 million yuan and 5 billion 209 million yuan respectively. In November 2021, the formula changed slightly, and the US, Kwai, and country garden services were bought 28 billion 400 million yuan, 11 billion 840 million yuan and 47 billion 115 million 200 thousand yuan respectively, ranking the top three.
It can be seen that even if the Hong Kong stock technology index has performed poorly in the recent stage, it is difficult to block the interest of southward capital to increase positions in technology stocks.
For the southward capital increase, some analysts pointed out that the profit certainty of Hong Kong stocks and Chinese stocks is high and the valuation advantage is obvious. It is expected that investors are more optimistic about the new economic sector with asset scarcity in Hong Kong stocks and the sector benefiting from the return of China concept stocks.
Great Wall Fund said that at present, the valuations of industries and companies represented by science and technology Internet enterprises are generally low, and the head company is more attractive than the peg (price earnings ratio / net profit growth) valuation of US stock technology giants.
continuous warehouse reduction medicine
It is worth noting that in recent three months, southbound funds continued to reduce positions. Individual stocks, including the pharmaceutical and new energy sectors represented by Wuxi Apptec Co.Ltd(603259) and Byd Company Limited(002594) shares, had the largest outflow of YaoMing Biology (02269. HK), with a cumulative net sales of 440 million yuan.
Note: net purchase data of YaoMing biological in recent three months
The continued position reduction in the pharmaceutical sector is related to the weakening of the market’s risk appetite for the pharmaceutical sector. With the gradual clarification of the epidemic and the listing of several covid-19 drugs, the market expects that the epidemic will not be far from the end. At the same time, during the epidemic period, the stock price of pharmaceutical companies that benefited from the sharp rise in market demand also increased the valuation of the sector, making the market worried about the possibility of subsequent stock price rise.
expand the voice of southward funds
With the participation of southbound funds in the Hong Kong stock market, the scale continues to expand and its influence on Hong Kong stocks is also expanding.
Take 2021 as an example, the southward capital inflow reached 259.423 billion yuan in January 2021, which stimulated the sharp rise of Hong Kong stocks. At that time, the point of the Hang Seng Index rose to 31183.36, the highest point in 2021. Subsequently, Hong Kong stocks showed a downward trend, and southward funds withdrew from the Hong Kong stock market one after another, with an outflow of 52.988 billion yuan and 16.456 billion yuan in July and August respectively.
At the same time, in terms of individual stock transactions, the shareholding proportion of southbound funds has occupied a large proportion in Hong Kong stocks. In 2021, the proportion of individual shares held by southbound capital accounting for 30% of the total share capital has reached 30 shares, 81 shares with a shareholding ratio of 20% – 30% and 186 shares with a shareholding ratio of 10% – 20%.
Note: according to the data as of December 28, 2021, the list of high proportion shareholding of southbound capital
the southbound scale is expected to further expand
Many institutions said that the current relatively loose liquidity environment and obvious valuation advantages are enough to attract more domestic capital inflows at this stage, so as to promote the valuation repair in the Hong Kong stock market.
Qiu Dongrong, fund manager of Zhonggeng fund, is very optimistic about the large cap value stocks in Hong Kong stocks and some Internet. He pointed out that at present, with the gradual release of fundamentals, regulatory level and liquidity pressure, Hong Kong stocks deserve attention.
Although the US interest rate hike has made the global financial markets worried about the return of the US dollar, some analysts said that different from the past interest rate hike cycle, the southward capital is expected to continue to flow in, which may bring a slightly different trend to Hong Kong stocks.
China International Capital Corporation Limited(601995) recently pointed out that the current environment faced by the Hong Kong market is similar to that in early 2016 and early 2019 in many aspects, such as the market experienced a sharp correction, the valuation was at an all-time low, the investor sentiment was low and the wait-and-see mood was strong, there was a lack of capital inflow for a period of time, but the policy entered a relaxation period, and so on.
The inflow of southward funds began at this time, which was similar to that at that time. CICC expects that the current relatively loose liquidity environment and obvious valuation advantages are enough to attract more domestic capital inflows at this stage, thus promoting the valuation repair in the Hong Kong stock market.
