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Original Caption: Accelerated Southward Capital Inflow to Domestic Capital May Overpower Hong Kong Stock Pricing Power in Future
On January 19, the net inflow of funds to the south under the interconnection mechanism again reached a record. Wind statistics show that, at the close of the Hong Kong Stock Exchange that day, the net inflow of funds southbound reached HK $ 26.592 billion, setting a record since the opening of the Shanghai-Hong Kong Stock Connect. after January 18. In the 12 business days since 2021, the net southbound inflow of funds has reached HK $ 185.293 million. This has also allowed the net inflow of funds on the Hong Kong stock exchange through the interconnection mechanism to reach HK $ 1.92 trillion since the opening.
At the close of the day, the Hong Kong stock market had a strong performance: the Hang Seng index closed up 2.7%, the Hang Seng technology index rose 2.84% and market volume exceeded 300,000 million Hong Kong dollars. The real estate, healthcare, finance and consumer goods sectors were strong, with Anta Sports, Sunny Optical Technology, BYD Electronics, CICC and the Hong Kong Stock Exchange reaching new highs.
Since 2021, through southbound trading, southbound funds have skyrocketed in Hong Kong stocks, fueling the continued uptrend of the Hong Kong stock market and also attracted investors’ attention. of the continent. Data shows that since 2021, the Hong Kong Hang Seng Index has risen 8.85% and the Hang Seng China Business Index has risen 9.27%. At present, many institutions are very optimistic about investment opportunities in the Hong Kong stock market. Everbright Securities noted that the Hong Kong stock market is in a positive state in terms of fundamentals, capital and sentiment. About 70% of the total profit of the Hong Kong stock market is derived from Chinese stocks. The overall market profit growth rate is closely related to the mainland Chinese economy. At the same time, from the perspective of industry stocks, there is generally a wide valuation margin between AH and AH in most industries. After the reform of Hong Kong’s listing system, some high-quality pharmaceutical and technology consumer stocks were also sent to Hong Kong for listing, greatly improving asset quality. In fact, A-share funds covering Hong Kong stocks and Hong Kong stock QDII funds are receiving substantial subscriptions. Among the new funds issued in January this year, more than half of the products have included Hong Kong stocks in the scope of investment.
In the long term, the continued southward net inflow of funds is expected to continue. The IACC expects long-term structural capital inflows to the south to remain strong. Over the next 3-5 years, it will be around HK $ 200 to 400 billion per year. This is due to the diversification of the asset allocation of Chinese households and the increase in the issuance of mutual funds, and New economy companies in the Hong Kong market continue to grow and improve their long-term attractiveness. China Merchants Fund noted that from a medium to long-term perspective, under the trend of “weak US dollar and stabilized RMB”, the advantages of high earnings certainty and low valuation of Hong Kong stocks and Chinese stocks are obvious. Overlapping that current Hong Kong shares have a historically high investment price ratio compared to A shares, southbound capital is expected to continue to enter.
At the same time, some research institutions pointed out in unison that with the continued flow of capital from the south, the pricing power of the Hong Kong stock market will change. Guosheng Securities noted that in recent years, southbound capital from southbound trading has continued to flow into Hong Kong stocks. Especially in 2020, the cumulative net inflow of the southbound trade channel alone will be close to HK $ 700 billion, which has largely covered the impact of foreign capital outflows. In fact, domestic funds to the south have become the largest capital increase on the Hong Kong stock exchange and the drag on market performance. According to their calculations, in 2020, the share of mainland Chinese funds in the total turnover of the Hong Kong stock market increased to about 15%, representing 1/3 of the share of foreign funds in Hong Kong stocks. Hong Kong. With the accelerating flow of funds from the south to the Hong Kong stock market, funds from the south are expected to repeat the process of funds to the north affecting A shares in recent years, seize the fixing power of Hong Kong stock prices and become the decisive force in the performance of the Hong Kong stock market. Guosen Securities also noted that the huge amount of funds to the south reflects that domestic institutions are paying increasing attention to the Hong Kong stock market. Today, “the proportion of shares subject to trading in the south does not exceed 50% of the fund’s equity assets” has become the standard for domestic fund products. The capital to the south continues to rise and the pricing power of Hong Kong’s shares will shift from foreign capital to domestic capital in the future.
