Securities Times reporter Roman
Investor Wang Kai ridiculed the current Hong Kong stock market, "Looking around, I can't even find a decent target. The current decline has nothing to do with the company's fundamentals, and funds are leaving the market in a panic."
The continuous epic volatility in the US stock market dragged down the Hong Kong Hang Seng Index, causing its market conditions to be sluggish.
The current PE (price-earnings ratio) of the Hang Seng Index is only 7.4 times, which is at the lowest level in more than 10 years, even comparable to the level during the Asian financial crisis in 1997.
Hong Hao, chief analyst of China Market Strategy of Sirui Research, told the Securities Times reporter that Hong Kong stocks have been seriously oversold. From the data point of view, the proportion of constituent stocks that are relatively strong or higher than their 200-day moving averages are all historically one of the lowest levels.
With the stock price going down, many companies in Hong Kong stock repurchase their own stocks with real money to highlight the investment value.
Wind data shows that as of October 31, a total of 214 Hong Kong-listed companies spent HK$78.9 billion to implement share repurchases, setting a record for Hong Kong stocks since repurchase data was available.
However, the repurchase amount of as high as HK$78.9 billion still seems to be unable to stop the downward trend of Hong Kong stocks.
Where is the bottom of the Hong Kong stock market, no one seems to be able to answer.
Hong Kong stocks are severely oversold
On October 24, the Hang Seng Index closed down 1,030 points, or 6.36%; on October 31, the Hang Seng Index fell another 1.18% to 14,687 points. Levels were comparable during the 1997 Asian Financial Crisis.
The biggest decline is the Hang Seng Technology Index, which has fallen by nearly 50% since the beginning of the year, and the latest report is 2852.57 points.
It is worth mentioning that on October 24, the Hang Seng Technology Index fell by 9.65% on the day, and the index reached a maximum of 11,001.78 points in February 2021. The current high point has fallen by more than 74%, becoming the largest decliner in the global stock index. .
The stock price performance of the 30 constituent stocks of the Hang Seng Technology Index has been particularly sluggish this year.
Xiaopeng Motors, SenseTime, Bilibili, Mingyuan Cloud, GDS, Sunny Optical Technology all fell by more than 70%, AAC Technology, Hua Hong Semiconductor, China Literature, Kingdee International, Xiaomi, Tencent, Kuaishou, etc. fell by more than 50% (Table 1).
Statistics show that the average daily turnover of Hong Kong stocks in the past three months has shrunk to HK$97.9 billion, corresponding to the current market value of HK$30.8 trillion, highlighting the sluggish turnover.
It is worth noting that the short-selling turnover of Hong Kong stocks has increased significantly compared with recent days.
Entering October, the short-selling rate of Hong Kong stocks continued to hover at a historically high level.
Statistics show that the 20-day average short-selling ratio of Hong Kong stocks reached 20%, a historical high since 2006.
A higher short-selling ratio reflects that investors are short on the future price of stock assets, so they borrow and sell securities in advance, and then buy them back at a lower price in the future and return them to the broker to earn the difference (Figure 1).
At present, the total market value of Hong Kong stocks is 30.8 trillion Hong Kong dollars. At the end of 2021, the total market value of Hong Kong stocks is 42.38 trillion Hong Kong dollars. In less than a year, the market value has evaporated by nearly 12 trillion Hong Kong dollars.
At present, the average price-earnings ratio of all stocks on the main board of the Hong Kong stock market is 8.8 times. Investor Wang Kai said, "I know the valuation is low, but it is difficult to say whether it will continue to decrease."
Hong Hao told the Securities Times reporter, "Hong Kong stocks have reached a serious oversold level. From the data point of view, the Hang Seng Index, whether it is relatively strong or weak, or the proportion of constituent stocks above its 200-day moving average, is at one of the lowest levels in history. ."
Wang Kai said, "Looking ahead, we don't know what other stocks to buy, and we can't predict the market trend. There are too many uncertain factors. The flight of market funds has nothing to do with the company's fundamentals, but is completely dominated by emotions. The low valuation problem has been around for a long time and cannot be a reason to buy. For example, Tencent has fallen to more than HK$200, but I still choose to wait and see.”
And where did the strength of this sell-off come from?
Hong Hao told reporters that the market value of positions held by foreign securities firms in Hong Kong is plummeting, while the market value of positions held by mainland securities firms has remained basically stable. This differentiation started after July.
Foreign securities companies in Hong Kong are still reducing their positions, which deviates from the position differentiation of mainland securities companies.
Is the market bottoming out?
Hong Hao told reporters that the impact of geopolitics, the US' increased containment of China's semiconductor industry, and Sino-US audit and supervision cooperation matters, all affect the performance of Hong Kong stocks; not to mention that the Hong Kong Monetary Authority has been dragging its feet in raising the prime interest rate at the same time as the Federal Reserve. , and chose to consume foreign exchange reserves to maintain the linked exchange rate system pegged to the US dollar.
At oversold levels like this, a lot of bad news is already priced in.
"No one can tell you when the Hong Kong stock market will bottom out. Given that the U.S. market is still hesitant about the outlook for U.S. inflation, and market sentiment is unpredictable, the last wave of U.S. stocks' downturn will be very sharp, which many people are not prepared for. Yes, the United States will continue to be one of the sources of its volatility. That is to say, Hong Kong stocks will have a very obvious volatility in the future. Because the interest rate and monetary policy of the Hong Kong Monetary Authority are linked to the Federal Reserve, there is no way changed." Hong Hao said.
Meanwhile, the Hong Kong Monetary Authority is battling the Hong Kong dollar bears.
At present, the exchange rate of the Hong Kong dollar has fallen to 7.85 again, hitting the weak-side exchange guarantee. The Hong Kong Monetary Authority will undertake another 3.062 billion Hong Kong dollar sell order according to the linked exchange rate system on October 20.
In just a few months since May 12, the Hong Kong Monetary Authority has received money 39 times, with a total of 238.1 billion Hong Kong dollars, which shows that the pressure of capital outflow is great.
According to the China Capital Market Strategy Report published by Morgan Stanley, statistics show that stock-level active fund managers (Stock-level active managers) accumulated a net selling amount of 33 billion US dollars (about 259.038 billion Hong Kong dollars) in September. Technology stocks recorded their highest monthly net selling this year.
A long active fund manager told reporters, "Most portfolio managers are accelerating the redemption of funds at this stage and reducing their investment positions in Chinese Internet stocks. Due to market volatility, our investors (pensions, sovereign funds) are short-term. Will remain defensive and in no rush to add Chinese tech stocks. The current peak-to-trough decline of the Hang Seng Technology Index is comparable to the Nasdaq's decline in 2000, and we prefer to look for quality in the upcoming market cycle Growth stocks."
There are signs that funds are continuing to withdraw from Hong Kong stocks.
According to data from the Hong Kong Monetary Authority, demand deposits in Hong Kong decreased by 11.7% year-on-year in August, while time deposits increased by 22.6% year-on-year.
Since the beginning of this year, foreign currency time deposits (the majority of which are in US dollars) have recorded a relatively high growth, mainly due to the capital outflow caused by the US interest rate hike and the conversion to US dollars (Table 2).
Yan Zhaojun, a strategic analyst at Zhongtai International, told reporters that with the gradual increase in the interest rate of Hong Kong dollars, time deposits in Hong Kong dollars are increasing, which means that a large number of demand deposits or funds in the stock market have returned to the time deposits of Hong Kong dollars and U.S. dollars with higher interest rates.
The Securities Times reporter learned that many banks in Hong Kong offer time deposit discounts. Individual customers who open designated time deposits with new funds or exchange funds can enjoy preferential annual interest rates.
For example, the maximum yield of U.S. dollar time deposits can reach 5.1%, the highest yield of Hong Kong dollar time deposits is 4.6%, and the highest yield of RMB time deposits is 2.5%.
"Since the current one-year Hong Kong dollar time deposit rate has reached more than 4%, and the higher risk-free interest rate has weakened the attractiveness of risk assets, it is expected that the liquidity and risk appetite of short-term Hong Kong stocks will remain low. Compared with stock market investment , the yield of buying this time deposit product is also quite impressive." Yan Zhaojun added.
Wang Kai said that the participation of foreign capital in Hong Kong stocks is very high, and foreign capital has a lot of options, so the opportunity cost is high, such as investing in various financial products such as time deposits and high-yield bonds, so high interest rates have a great impact on Hong Kong stocks, that is, capital The willingness to flow into the stock market has become lower.
In an interview with a Securities Times reporter, Ou Guansheng, chief executive of the Hong Kong Stock Exchange, said, "It is impossible to determine when the Hong Kong stock market will recover. In the context of the overall market downturn, we are still facing the uncertainty of global inflation and rising interest rates. Therefore, our investment Traders will be very hesitant in the transaction process, resulting in a decrease in transaction frequency.”
During the downturn in stock prices, the value of investment has gradually emerged, and many listed companies have repurchased shares to boost market confidence.
Listed companies' repurchase volume hits record high
The decline of Hong Kong stocks has nothing to do with the fundamentals of the company, but indiscriminate declines in various industries.
With the panic decline in the market, the overall valuation of Hong Kong stocks is already at a historical extreme.
More listed companies repurchase generously, setting off a wave of "repurchase tide" in the market.
Wind data shows that as of October 31, a total of 214 listed companies have implemented share repurchases this year, with a total amount of HK$78.9 billion, setting a record for Hong Kong stocks since repurchase data was available.
The repurchase amount of Hong Kong-listed companies in 2021 will be HK$29.6 billion, and the repurchase amount in 2020 will be HK$11.396 billion.
In this round of repurchase, 10 listed companies have repurchased more than HK$1 billion.
Among them, Tencent’s repurchase amount has reached 24.489 billion Hong Kong dollars this year, accounting for 31% of the overall repurchase amount; followed by AIA’s repurchase of 27,200 shares at a cost of 20.57 billion Hong Kong dollars; HSBC Holdings’ repurchase amount reached 3.515 billion Hong Kong dollars; Xiaomi this year Since then, 21,900 shares have been repurchased, costing a total of HK$2.583 billion.
In addition, a notable feature of this round of repurchases is that the repurchase frequency is very intensive.
Tencent has repurchased 76 times this year and 30 since September.
AIA has repurchased 128 times, while Xiaomi, HSBC Holdings, Mingyuan Cloud, and JD Health have all repurchased more than 50 times.
According to the Haitong Securities Research Report, Hong Kong stocks have experienced five rounds of buybacks since 2005.
Historically, Hong Kong stocks tended to stabilize and rebound after a wave of buybacks.
In the medium and long term, both the Hang Seng Index and the Hang Seng Technology Index can bring better investment returns after the end of the repurchase wave, and among them, the information technology sector performed the best after the repurchase wave.
Hong Hao said, "The company's repurchase is of course to highlight investment value or confidence, but I have repeatedly emphasized that the current decline has nothing to do with the company's fundamentals, but panic caused by emotions, withdrawing from the stock market to a higher-yielding company. place."
Therefore, the repurchase of listed companies cannot be used as the best time to invest in Hong Kong stocks.
The reporter's statistics show that the average repurchase price of more than 90% of the listed companies during the period was higher than the current price, and the book suffered losses. The total loss amounted to 20.7 billion Hong Kong dollars, and the repurchase losses were mainly concentrated in 18 stocks.
Among them, the average repurchase price of Tencent this year is 320.14 Hong Kong dollars per share. As of October 31, the closing price was 205.6 Hong Kong dollars, the loss ratio reached 36%, and the repurchase loss amounted to 8.761 billion Hong Kong dollars.
Secondly, AIA's repurchase loss reached HK$4.403 billion, and the repurchase loss of the two stocks accounted for 64% of the total loss (Table 3).
The above-mentioned long active fund manager told reporters, "We still put macro risk management first and are not in a hurry to find trading opportunities. Our current strategies are mostly conservative, waiting for the introduction of more key information such as monetary policy to increase Growth stock investing in China.”
Market gathering momentum for rebound
It is true that the impact of global geopolitical changes still exists, and Hong Kong stocks have clearly not bottomed out.
However, Hong Hao believes that this is a process of shuffling. Some people sell and some people buy. In any case, there should be trading opportunities.
From the data point of view, since July, the overall net outflow of overseas active funds, and the outflow time is long.
The southbound funds continued the trend of steady inflow since the beginning of the year, and entered a state of accelerated bottom-hunting in October.
In the most recent week (October 24-28), the overall inflow reached HK$28.1 billion, the largest weekly inflow since mid-March.
Another piece of data also showed that there appeared to be bucking the trend.
In recent weeks, the weekly capital inflow of Hong Kong's largest Hong Kong stock ETF Tracker Fund (2800.HK) has reached an all-time high, while the cumulative capital inflow of this ETF is also the highest in history.
"I bought it from the 15,000-point wet position. Although I didn't buy a lot, adding a position is a process. It's hard for me to say when the bottom is at the bottom, but it's already reached my psychological point, and you're unlikely to buy at At the lowest level, or selling at the highest level. As far as the current HSI is oversold, I think it is possible to gradually increase positions. This is not a problem with the company’s fundamentals, nor is it a problem with the business model itself. But the premise is that the investment can Whether it can hold it or not, I think as long as the time is long enough, such as more than three years, I don't think there is any problem." Hong Hao said.
Yan Zhaojun said that funds are seeking the highest returns, and the current withdrawal of Hong Kong stocks does not mean that they will never return.
When the panic has been digested or overseas markets have gradually stabilized, Hong Kong stocks are prone to a rebound driven by short positions and liquidation.
As of October 31, the AH premium index reported 156.06 points, the highest point in the past 10 years. It also reflects that the current valuation discount of H shares relative to A shares is at the highest level in history.
If the market's short-term risk appetite picks up, H-shares will be more resilient than A-shares.
As of the close on October 31, the market short-selling ratio rose to 19.6%.
Some analysts have pointed out that the periodic highs of the short-selling ratio are usually also the periodic lows of the stock market.
That is to say, under the accumulation of shorts in Hong Kong stocks, the bulls are also waiting for an opportunity to counterattack and gather momentum for the market to rebound.
The CICC Research Report believes that the current capital situation of Hong Kong stocks reflects the "triple pressure" faced by the market, that is, the tightening of the Federal Reserve affects liquidity, domestic growth affects profit expectations, and the geopolitical situation affects risk appetite.
In the short term, the current situation of foreign active funds' significantly low allocation to Hong Kong stocks needs to find a turning point in the latter two.
The analysis of Guohai Securities pointed out that Hong Kong stocks are more affected by the Federal Reserve's monetary policy. If the future economic recovery fails to exceed expectations, the rebound of Hong Kong stocks may be weaker, and the inflection point of changes in US stocks may need to be considered in December.
Conservatively, the Hong Kong stock market will not be able to reverse until next year, and the probability of ushering in a higher level of market is even greater.
Li Zhiwu, manager of Chuangjin Hexin Hong Kong Stock Connect Growth Fund, said that he is very optimistic about the future of Hong Kong stocks. The valuation of Hong Kong stocks is close to the historical pessimistic extreme point, and the margin of safety is extremely high.
From the historical experience, the return of this extreme position in the future is quite considerable.
Secondly, this round of historically rare slump is not only a period of transformation of domestic economic fundamentals, but also a period of overseas liquidity crunch. It has encountered a historic epidemic and is in a period of policy regulation in many domestic pillar industries, which has affected investors. confidence.
But the good thing is that the bad news has already been reflected in the stock price. As long as there is confidence in the Chinese economy, the winning rate will be even greater.
At the same time, as a market regulator, the Hong Kong Stock Exchange has recently released positive results.
On October 19, the Hong Kong Stock Exchange issued a consultation document on the new listing rules for special technology companies, suggesting that the existing listing system in Hong Kong should be expanded and improved to allow special technology companies to list in Hong Kong.
In this way, the types of listed companies in Hong Kong will be increased, so that more different types of companies can enter this deep and liquid international market, and at the same time, it will bring more choices to investors and enhance their attractiveness.