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Original title: Accelerated inflow of southbound capital to domestic capital may dominate the pricing power of Hong Kong stocks in the future Source: Economic Information News
On January 19, the net inflow of southbound funds under the interconnection mechanism hit a record high again. Wind statistics show that as of the close of the Hong Kong stock market that day, the net inflow of southbound funds reached 26.592 billion Hong Kong dollars, setting a new record since January 18.Shanghai-Hong Kong Stock ConnectA record high since the opening. In the 12 trading days since 2021, the net inflow of southbound funds has reached 185.293 billion Hong Kong dollars. This has also enabled the net inflow of funds into the Hong Kong stock market through the interconnection mechanism to reach 1.92 trillion Hong Kong dollars since the opening.
As of the close of the day, the Hong Kong stock market performed strongly.Hang Seng IndexIt closed up 2.7%, the Hang Seng Technology Index rose 2.84%, and the market volume exceeded HK$300 billion. The real estate, medical, financial, and consumer goods sectors are strong,Anta Sports、Sunny Optical Technology、BYDelectronic、CICC, Hong Kong Stock Exchange, etc. all reached new highs.
Since 2021, through southbound trading, southbound funds have exploded into Hong Kong stocks, which has driven the continuous upward trend of the Hong Kong stock market and also attracted the attention of mainland investors. Statistics show that Hong Kong’s Hang Seng Index has risen by 8.85% since 2021.Hang Seng China Enterprise IndexThe cumulative increase was 9.27%. At present, many institutions are very optimistic about the investment opportunities in the Hong Kong stock market.Everbright SecuritiesIt is pointed out that the Hong Kong stock market is in a positive state in terms of fundamentals, capital and sentiment. About 70% of the overall profit of the Hong Kong stock market is derived from Chinese stocks. The growth rate of profit in the whole market is closely related to the economy of Mainland China. At the same time, from the perspective of individual stocks in the industry, there is generally a large valuation spread between AH and AH in most industries. After the reform of the Hong Kong listing system, some high-quality technology and pharmaceutical consumer stocks also went to Hong Kong for listing, greatly improving the quality of assets. In fact, the A-share funds covering Hong Kong stocks and Hong Kong stock QDII funds are currently 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 long run, the continued net inflow of southbound funds is still expected to continue. CICC expects that long-term structural southbound capital inflows will remain strong. In the next 3-5 years, about 200-400 billion Hong Kong dollars per year, thanks to the diversification of Chinese household asset allocation and increased mutual fund issuance, and New economy companies in the Hong Kong market continue to grow and enhance their long-term appeal. China Merchants Fund pointed out that from a mid-to-long-term perspective, under the trend of “weak US dollar and stable RMB”, the advantages of high profit certainty and low valuation of Hong Kong stocks and Chinese stocks are obvious. Superimposing that the current investment price ratio of Hong Kong stocks compared to A-shares is at a historically high level, southbound funds are expected to continue to net inflows.
At the same time, some research institutions pointed out in unison that with the continuous inflow of capital from the south, the pricing power of the Hong Kong stock market will shift. Guosheng Securities pointed out that in recent years, southbound capital has continued to flow into Hong Kong stocks. Especially in 2020, the cumulative net inflow of the southbound trading channel alone will be close to 700 billion Hong Kong dollars, which has largely hedged the impact of foreign capital outflows. Domestic funds going southward have in fact become the most important capital increase in the Hong Kong stock market and the ballast stone that determines market performance. According to its calculations, the proportion of funds from the Chinese mainland in the total turnover of the Hong Kong stock market in 2020 has increased to about 15%, accounting for 1/3 of the proportion of foreign funds in the Hong Kong stock market. With the accelerated flow of funds from the south to the Hong Kong stock market, the funds from the south are also expected to repeat the process of northward funds affecting A shares in the past few years, grab the pricing power of Hong Kong stocks and become the decisive force influencing the performance of the Hong Kong stock market. Guosen Securities also pointed out that the huge amount of southward funds reflects that domestic institutions are paying more and more attention to the Hong Kong stock market. At present, “the proportion of investment in stocks under Southbound Stock Connect does not exceed 50% of the fund’s stock assets” has become the standard for domestic fund products. The southward capital continues to increase, and the pricing power of Hong Kong stocks will shift from foreign capital to domestic capital in the future.
(Editor in charge: Li Wei)
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