Hong Kong stocks closed on Monday with a rise again, the Hang Seng Index rose by more than 9% during the National Day holiday, the Hang Seng Technology Index and the Hang Seng State-owned Enterprises Index rose by more than 10%, and the premium rate of A shares to H shares fell rapidly, and there was almost no suspense that Chinese assets would continue to rise after the holiday.
Hong Kong stocks continue to rise sharply //
Under the introduction of a series of economic and policy policies before the holiday, Chinese assets have become the target of global capital attention and crazy grabbing. The A-share market was closed during the 7-day National Day holiday, and Hong Kong stocks continued to rise. On Monday, the Hang Seng Index, the Hang Seng Tech Index and the Hang Seng China Enterprises Index continued to hit two-and-a-half-year highs. During the National Day holiday, the three major stock indexes rose by 9.30%, 13.36% and 10.93% respectively.
In terms of sectors, Wind Hong Kong's secondary industry, Hong Kong's diversified financial industry rose by 48.75% during the long holiday, ranking first, and semiconductors also rose by more than 40%. Nine industries, including insurance, technology hardware and equipment, rose by more than 10%.
Overseas funds have also rushed to raise Chinese assets, with FTSE China A50 futures rising nearly 3% on Monday, hitting a new high since the beginning of 2022. During the long holiday, it rose by 14.32%.
Japan-listed A-share CSI 500 Index ETF rose 89% on Monday, up more than 20 times during the long holiday.
The premium rate of AH shares is declining rapidly //
After the National Day holiday Hong Kong stocks rose sharply, the 149 companies listed on A-shares and Hong Kong stocks at the same time, the latest A-share premium rate to H-shares fell sharply. Wind data shows that the overall average premium rate of A-shares to H-shares listed in both places on October 7 was 62.75%, down 45.04 percentage points from September 30. The Hang Seng Stock Connect AH Premium Index fell to a 4-year low. The relative investment cost performance of A-shares has risen sharply.
The premium of some A-shares to H-shares has been completely erased, and there is a negative premium. On September 30, all AH shares were trading at a higher price than H shares, and on 7 October, 9 H shares were trading at a higher price than A shares. (The following table shows stocks with a premium rate of less than 10% for AH shares and a decrease of more than 100% for holiday premiums)
Chinese assets continue to be bullish //
Whether it is A-shares or Hong Kong stocks, they are generally optimistic about institutions. Throughout the holiday, agency conference calls, research reports, and trading desk information were frequent. Institutions believe that the upward momentum of China's stock market will continue, and the market's expectations for the future have become more positive. On October 4, the latest disclosure information of the Hong Kong Stock Exchange showed that JPMorgan Chase bought a number of Hong Kong stocks on September 27, adding HK$4.1 billion in one day to deploy Chinese assets. Many hedge funds have also accelerated their allocation to Chinese equities, buying at a record pace.
BlackRock Investment Research said it upgraded Chinese equities from neutral to overweight. The agency believes there is still room for moderate overweight in Chinese equities in the near short term, given the near-record discount of Chinese equities to developed market equities and the presence of catalysts that could spur investors to re-enter the market.
Xing Ziqiang, chief economist of Morgan Stanley, said: "The National Day Golden Week is the busiest week in the 20 years of his career in international financial institutions, with no less than 3,500 overseas international investors visited and communicated with him by telephone, and everyone's confidence in China's economy is gradually recovering.
HSBC recently upgraded Chinese mainland equities from neutral to overweight, noting that it is still a good time to participate in the rally as current valuations remain low and investors are lightly positioned. Its valuation model suggests that Chinese mainland equities are fundamentally undervalued by about 15%, and that upward trend is expected to continue as more money flows in.
Xing Cheng, manager of the Hang Seng Former Hong Kong Stock Connect Select Mixed Fund, believes that the Hong Kong stock market is showing the characteristics of a bottom, and before the rebound, the valuation of the Hang Seng Index has been below the historical average of the past 10 years for a long time. Compared with major overseas stock indexes, whether developed or emerging, the historical quantile of the valuation of most market stock indexes is above 70%, and the valuation of the Hong Kong stock market is obviously at a low level. At present, there is a significant marginal improvement in both liquidity and fundamentals, which provides significant support for the valuation repair of Hong Kong stocks.
Chen Guo of China Securities Construction Investment believes that this round of market is a rare market with three factors: upward revision of profit expectations, decline in risk-free interest rate and rise in risk appetite, so it is not a simple over-falling rebound, but a reversal. In fact, the rise of the Hong Kong stock index can be regarded as a bull market in a general sense, and the A-share market under a similar background and logic can be regarded as a bull market.
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