View financial news and market trends on East Money, choose East Money Securities for one-stop account opening and trading. The adjustment has arrived! After yesterday’s significant rise, Hong Kong stocks experienced a sudden change this morning. The Hang Seng Tech Index fell by more than 6% at one point, with brokerage and real estate stocks diving. What happened? Firstly, J.P. Morgan analysts pointed out in a report that the current valuation of Chinese real estate stocks already reflects an operating environment comparable to before the Evergrande crisis, which is unreasonable.
The foreign-dominated Hong Kong stock market during the holiday may return to rationality in stages. Secondly, the Japanese stock market surged today, with a noticeable seesaw effect. Concurrently, the US dollar has achieved four consecutive days of gains, and expectations for US interest rates seem to have changed again. Thirdly, the recent rapid and excessive increase in Hong Kong stocks, with some blue-chip stocks like Tencent and Xiaomi, has valuations close to their US counterparts, possibly causing some concerns among foreign investors. The Hang Seng Tech Index plunged by more than 6%, and both the Hang Seng Index and the China Enterprises Index fell by more than 3%. J.P. Morgan analysts noted in a report on Wednesday that the current valuation of Chinese real estate stocks already reflects an operating environment comparable to before the Evergrande crisis, which is unreasonable. Real estate and brokerage stocks that soared yesterday corrected significantly. Stocks like Kaisa, China Aoyuan, Shimao, and Sunac fell collectively, with declines around 20%. CITIC Securities fell by more than 12%, and the Southern Science and Technology Innovation Board 50 ETF experienced significant short-term fluctuations. It is worth noting that today, Hong Kong stocks and Japanese stocks formed a seesaw effect again, with Japanese stocks falling yesterday and Hong Kong stocks rising; today, Japanese stocks rose, and Hong Kong stocks fell. There seems to be a force competing for capital. Japanese Chief Cabinet Secretary Yoshimasa Hayashi stated that Shigeo Ishiba and Kazuo Ueda confirmed that the Japanese government and the central bank continue to cooperate according to the agreement. Ishiba said that specific monetary policy is decided by the Bank of Japan. Additionally, although Chinese assets have risen recently, it should be noted that while the Federal Reserve has cut interest rates, the US dollar index has achieved four consecutive days of gains recently. Moreover, on Wednesday, the latest release showed that the number of new private-sector jobs in the US in September rebounded beyond expectations, putting pressure on market expectations for the Federal Reserve to cut interest rates by 50 basis points again in November. On the other hand, after the significant rebound in Hong Kong stocks, valuations are also rising rapidly. The valuations of some blue-chip stocks are not far from those of US blue chips. For example, Tencent Holdings’ PE (TTM) is 25.72 times, while Meta’s PE (TTM) is only 28 times. Xiaomi’s PE (TTM) is 28 times, and Apple’s is 33 times.The valuation constraints for large-cap stocks may have already emerged. What lies ahead? Many believe that the current rebound in Hong Kong stocks is merely a pause rather than an end. Firstly, despite adjustments in the Hong Kong market today, the A50 index remained relatively strong. The index briefly turned negative due to a significant drop in Hang Seng Tech but quickly recovered. Secondly, although large institutions like J.
P. Morgan are not very optimistic about real estate, the latest data from the Hong Kong Stock Exchange shows that on September 26th, J.P. Morgan increased its holdings in Ping An of China (02318.HK) by 39.86 million shares, at a price of 44.4327 HKD per share, totaling approximately 1.771 billion HKD. After the increase, the latest holding amount is about 617 million shares, with the latest holding ratio at 8. 28%. Moreover, J.P. Morgan also upgraded the rating of China Galaxy H shares to overweight, with a target price of 12.59 HKD per share, implying a 39% increase. Huatai Securities believes that from the perspective of incremental capital, the first factor is the global foreign capital replenishment effect; it is estimated that by the end of the second quarter, the proportion of Chinese stocks in the equity portfolios of the world’s top twenty asset management institutions (including mutual funds/hedge funds/trusts, etc. ) is 1.3%, which is 1.9 percentage points lower than the MSCI ACWI China benchmark weight; if expectations improve and foreign capital’s allocation to China returns to the first quarter level (1.7 percentage points underweight), it could bring about an inflow of about 17 billion USD to top asset management institutions; if it returns to the central level of 2018-2020 (0.5 percentage points underweight), it could bring about an inflow of about 100 billion USD. Secondly, the effect of existing short positions being closed; although the proportion of short transactions in the Hong Kong stock market has been at a historically low level since September, the total number of unsettled short positions in the market has not yet shown a significant decline, and the force of existing short positions being closed has not been fully released. In addition, market research firm DataTrek Research stated that if history is taken as a reference, there may still be a lot of room for this round of growth. The firm said that if comparing the relative performance of iShares China Large-Cap ETF (FXI) and SPDR S&P 500 ETF Trust (SPY) over a 100-day period, in times of positive policy shifts such as 2009, 2015, and 2023, Chinese stocks led U.S. stocks by more than 30 percentage points, while currently, they are only leading by 13 percentage points. Analysts believe that the subsequent space for Hong Kong stocks may depend on the popularity of A-shares on one hand, and on the other hand, the trend of the U. S. dollar. Recently, as Chinese assets have risen, the U.S. dollar has been too strong, and the Federal Reserve is still reducing its balance sheet.In other words, offshore US dollar liquidity is not as loose as one might imagine. Consequently, the seesaw effect mentioned earlier occurs. If the Hang Seng Index rises too much and valuations increase too rapidly, natural fluctuations will inevitably take place. Experience the new and innovative investment research assistant immediately. (Source: Securities Times)
