Follow Hong Kong Investment Immigration and Hong Kong Economic environment: Sensitive Hong Kong investors have discovered that as mainland funds rush southward, the Hong Kong stock market has not only suddenly become vibrant but has also recently incorporated mainland styles.
According to The Wall Street Journal, since April 8, funds from the mainland entering the Hong Kong stock market have reached as high as 26.4 billion yuan. This massive influx of capital has driven the stock prices of mainland companies listed in Hong Kong to surge, pushing the trading volume of Hong Kong stocks to a historical high.
Mainland investors primarily focus on familiar company stocks.
However, the companies that mainland investors are particularly interested in are those well-known in the mainland or those listed in both the mainland and Hong Kong, but with a significant discount on A-shares compared to H-shares. For example, Hanergy Thin Film and Golden Eagle Retail Group. The continuous rise of A-shares has reversed the previous discount situation of A-shares relative to H-shares into a premium. Hong Kong stocks are priced at about 23.4% lower than their mainland counterparts.
Meanwhile, large blue-chip stocks in Hong Kong, such as HSBC Holdings, Cheung Kong Holdings, and Swire Properties, have not made it into the top ten stocks traded by mainland investors.
The report also states that mainland investors prefer to avoid large blue-chip stocks controlled by international investors. Wang Zhihua, Chief Investment Officer of Southern Eastern Asset Management and Portfolio Manager of China New Balance Fund, stated that mainland investors fear being overpowered by international investors when buying blue-chip stocks. "Mainland investors realize that the pricing power of Hong Kong large-cap stocks is in the hands of institutional investors, especially overseas investors. Therefore, mainland investors generally prefer small-cap stocks."
Thus, most mainland investors are buying stocks based on common sense. Many only purchase stocks of companies that are listed in Hong Kong but not in A-shares and are familiar to them.
Winner Lee, an Asian equity derivatives strategist at BNP Paribas, stated, "Mainland investors may choose brands they are familiar with." These brands include home appliance retailer Gome Electrical Appliances. In the last three trading days of last week, Gome's stock price rose by 46%. This stock was also the most traded by mainland investors through the Shanghai-Hong Kong Stock Connect last Friday.
Self-reinforcing logic.
The suddenly heated Hong Kong stocks also have a self-reinforcing logic. For instance, mainland investors bought H-shares of brokerage firms Haitong Securities and CITIC Securities, reasoning that under the Shanghai-Hong Kong Stock Connect, these brokerages' businesses will explode. Following the same logic, China South Locomotive and China North Locomotive were also among the best-performing blue-chip stocks in Hong Kong last week.
Winner Lee from BNP Paribas stated, "The Hong Kong stock market will be more sensitive to mainland policies in the future."
Wall Street Journal mentioned that the Hang Seng Index in Hong Kong briefly broke through 27,000 points last week, reaching a seven-year high. The trading volume peaked at 2,939 Hong Kong dollars, setting a record high and was three times the previous average daily trading volume.
Hong Hao, Managing Director and Chief Strategist at Bank of Communications International, believes that the Hong Kong stock market has entered a bull market, benefiting from cheap valuations, strong cross-border liquidity, and favorable technical conditions, with the Hang Seng Index expected to reach 32,000 points by the end of June, and the National Enterprises Index likely to exceed 19,000 points, both setting new highs since October 2007. These targets represent an upside potential of approximately 17% and 33% for the Hang Seng Index and the National Enterprises Index, respectively.