A week’s change!Can Hong Kong stocks see the light from now on?
Last week, Hong Kong stocks staged a coup de grace.The Hang Seng index plunged 10.40% on March 14 and 15, including a 5.72% drop on March 15. At one point, it fell to near 18,000, the lowest level since June 2012.On the 16th, the Financial Commission made a big announcement, which resulted in a wave of repurchase of concept shares. Hong Kong stocks turned around and rebounded strongly, with the Hang Seng Index up 9.08% and Hang Seng Technology up 22.20%.So far today, the Hang Seng index has risen 16.23 per cent to close above 21,000.(Wind, 0316-0325) Hong Kong stocks can see the sun?Can the current Hong Kong stock layout?I’m going to talk about that today.01 The current valuation level of Hong Kong stocks before the rebound, regardless of the price/earnings ratio, price-to-book ratio, AH premium rate which index, Hong Kong stock valuation has reached the historical extreme low range.In terms of p/E ratio, the dynamic P/E ratio of the Hang Seng index on March 15 was 8.8, which is in the quartile of 8.88% in the past decade and in the lowest 10% area.In terms of price-to-book ratio, on March 15, the Hang Seng Index’s price-to-book ratio was only 0.88 times, less than 1 times, commonly known as “broken net”, that is, the stock price of an enterprise is lower than its net assets.The decade’s price-to-book quantile is only 0.24%.And in horizontal comparison, it ranks lowest in the global important index.Data source: Wind,20220315 At present, the p/E and P/BOOK ratio have a certain recovery, recovery to the lowest 30% percentile area.(Wind, 20220323) Then look at the AH premium rate. This indicator represents the discount premium rate level of companies listed in BOTH A-shares and Hong Kong shares. The higher the AH premium rate is, it represents the same company, and A-shares are more expensive than Hong Kong shares.Gu has calculated the trend of hang Seng SHANGHAI-Shenzhen-Hong Kong Stock Connect AH share premium index since 2021, showing a state of gradual upward trend. On March 15, it hit a new high, reaching 151.71, which has been in the extreme level of the past decade.The current value is down to 141.57, although it has fallen back, but Hong Kong shares relative to the A shares price ratio is still more outstanding.To sum up, the valuation of Hong Kong stocks has entered a historically low range after the crash. After a rebound in nearly a week, it still has a strong valuation attraction compared with the global mainstream equity market.02 Strategic Allocation of Hong Kong stocks?It is interesting that during the crash, many investors were panicky, wondering whether “the valuation is not working”, “times are different”, “can not look at the valuation”.However, we found that the stability of the historical valuation of both A-shares and Hong Kong shares is very reliable. PE and PB are at A specific threshold, and it is difficult for the market to have further downside risks.Recently, some institutions and public fund managers issued a “strategic allocation of Hong Kong stocks” voice.The price of a stock is determined by both fundamentals, which are the texture of the company, and pricing, which is the money in the stock market.As an offshore market, Hong Kong stocks are mostly listed in mainland China, so their fundamentals follow domestic economic and policy trends, but their pricing is influenced by global financial policies and capital flows.At present, although the negative factors of Hong Kong stocks are marginal, but it is difficult to repair overnight, the sustainability of the rebound also depends on the landing of late policies, changes in the international situation.◆ First, investing in Hong Kong stocks, including Chinese concept stocks, should not have the mentality of bottom-fishing and low valuation, but invest in the core assets of China’s economy.Market value at present, there are more than a third of Chinese companies listed on the hkex, one in TMT, consumer, innovative medicine, finance, real estate, quite a proportion of the core assets are listed on the Hong Kong, China, we think that part of the leading company quality was no difference in the current downturn, the rebound in probability becomes the object of investors prior to cover.◆ Second, in terms of pace, we were cautiously optimistic about the Hong Kong market at the beginning of the year, more cautious in the first half and more optimistic in the second half.At present, we are more optimistic than at the beginning of the year. First, the Chinese economy will gradually improve after the epidemic recedes and the fiscal policy increases.At the just-concluded two sessions, the Chinese government also set a high GDP growth target of 5.5 percent for this year and stepped up fiscal policy support.Second, this round of raw materials rising trend is not sustainable.Raw material price has been rising sharply in the past year, actually this continued to rise after has reached very high levels of history, superposition of the global outbreak subsided after the release of labor supply, the conflict between Russia and Ukraine after the big probability falling energy prices, we believe this rally is not continuous, in raw material prices fall, in the middle and lower reaches of related targets will rebound in retaliation.Finally, a growing number of Chinese companies will be dual-listed in Hong Kong, with liquidity support from southbound funds to hedge against a decline in foreign investment.At present, most of the dual-listed companies in Hong Kong and Chinese concept stocks that have not yet been dual-listed plan to start dual-listing within this year. As many are still in the middle of rapid growth, if the valuation is low, it is likely to be supported by southbound capital, which is expected to effectively hedge the liquidity pressure caused by the withdrawal of foreign capital.Overall, we are relatively optimistic about the Hong Kong stock market in the medium term.To sum up, for long-term investors, Hong Kong stocks usher in a long-term allocation window period.However, the emotional repair is not overnight, we still need to be prepared for short-term wear and tear.(Investment is risky, entering the market should be cautious)