[Hot Investment Topic] Opening with a sharp rise! The Hong Kong stock market fluctuates, where are the opportunities?

The recent Hong Kong stock market has been quite volatile!$Hang Seng Index (800000.HK)$Since April 22, the longest consecutive increase since February 2018 has appeared, reaching 19,700. From the lowest point of 14,794 to the highest point within the year, the range increase has reached 33%. Since May 20, it has started to decline from 19,706.

These recent days have also been fluctuating. On May 31, the Hang Seng Index rose by over 1.7% at the opening, but closed down by 0.83%.$Hang Seng TECH Index (800700.HK)$Also rose by 2.49% shortly after the opening, but eventually closed down by 1.65%. After the opening on June 3rd, both the Hang Seng Index and the Hang Seng Technology Index quickly rose by over 2.5%.

Although everyone is used to the volatility of the Hong Kong stock market, they still can't help but wonder:Is there still a chance for the Hong Kong stock market? Can the Hang Seng Index reach 0.02 million points? If there is a chance, where exactly does the opportunity lie? How can you seize the opportunity?

In fact, Sir Niu already shared with everyone last weekSir Tam's perspective, combining recent market conditions with Sir Niu's insights,From the perspectives of valuation, liquidity, sector rotation, and IPO market, Sir Niu provides some tips on the Hong Kong stock market for everyone.

1. Is there really an opportunity? Let's start with the valuation level

To determine the future trends, valuation is a very necessary factor to discuss.

(The above image is from Wind)

It can be seen that the valuation of the Hang Seng Index has been declining since 2019, and the trend has been more pronounced since 2021. However, in the past year or so, there seems to be a trend of stabilization.

The current PE ratio is close to 10 times, at a relatively low level in the past decade, and this valuation level, compared to the global market, offers a higher cost performance ratio.

Taking a look at the recent performance of the listed companies in the Hong Kong stock market, it can be observed that heavyweight blue-chip companies have shown an improvement in profitability. With the improvement in the macroeconomic environment, the future profitability of many companies may continue to increase, and the current valuation may be on the lower side.$TENCENT (00700.HK)$、$HSBC HOLDINGS (00005.HK)$、$CHINA MOBILE (00941.HK)$Including companies like , heavyweight blue-chip companies have shown an improvement in profitability. With the improvement in the macroeconomic environment, the future profitability of many companies may continue to increase, and the current valuation may be on the lower side.

Considering the above factors,The market generally believes that Hong Kong stocks will see a valuation recovery. In other words, it is reasonable for higher valuation levels to emerge in the future, and at the same time, Hong Kong stocks may challenge higher prices.

2. Is there really an opportunity? It depends on liquidity.

Another important factor is liquidity. At the beginning of the year, liquidity in the Hong Kong stock market was poor and subdued for a period of time, but there has been significant improvement now.

Liquidity is closely related to the funding situation, so the improvement in liquidity can first be seen from the inflow of southbound funds.

(The above image is from East Money Information)

The net inflow of southbound funds in March and April exceeded 80 billion Hong Kong dollars. Although there was a slight slowdown in May, it is still much higher compared to March and April. Since May 21, there has been a relatively clear upward trend.Mainland investors' enthusiasm for investing in Hong Kong stocks has relatively surged.

Looking globally again, two bullish factors can be focused on.First, with the depreciation of the yen and the adjustment of Japanese stocks, global funds may shift from the Japanese stock market to the Hong Kong stock market. Second, as the further confirmation of the end of the Fed's interest rate hike cycle, the liquidity of the global market may further improve, and the undervaluation and high dividend yield of Hong Kong stocks may attract more foreign inflows.

How about the trading situation? Wind data shows that from May 1st to May 28th, The average daily turnover in the Hong Kong stock marketreached 104.76 billion Hong Kong dollars, with some trading days exceeding 110 billion Hong Kong dollars,a significant increase compared to 68.1 billion Hong Kong dollars in the same period last year, further improving market liquidity.

Moreover,the improvement in funds, liquidity, and fundamental factors (economic conditions and policies) complement each other.。The latter specifically includes what? For example, in addition to the Fed's expected rate cut, there are 5 measures on capital market cooperation with Hong Kong issued by the China Securities Regulatory Commission, as well as China's CPI and PPI data for April showing that economic activity may be gradually warming up, and so on.

Third, the Hong Kong stock market is continuously warming up, which may attract more fund inflows.

In fact, in terms of liquidity expectations in the Hong Kong stock market, the situation of the IPO market is also an important indicator. An active IPO market can attract more fund inflows.

How specific is the situation? So far this year, the Hong Kong IPO market has been continuously warming up, creating a strong profit effect, which is very evident in the performance of new stock listings.

From the beginning of 2024 to now, HKEX has listed 21 new stocks, with 12 stocks rising and only 5 breaking, with an average increase of 23.8% and a breaking rate of only 23.8%.Whether it is the profit effect represented by the higher average increase or the lower risk represented by the lower breaking rate, it has attracted a lot of attention and entry from IPO investors.

The first new stock in the Growth Enterprise Market (GEM) to be listed on the Hong Kong Stock Exchange in three years - $UBOT HOLDING (08529.HK)$for example, this new stock was highly sought after by investors during the IPO period, with an over subscription ratio of about 2500 times, and the initial trading price in the Futu grey market once rose by 160%.

Many investors are looking forward to further warming up of the Hong Kong IPO market, even returning to the boom of the 2020 Hong Kong IPO bull market. Of course, this depends on the continuous listing of high-quality new stocks and further fermentation of market sentiment.

Where exactly are the opportunities? And how to seize them?

Valuation repair, improved liquidity, and the warming of the IPO market all convey positive signals in the medium to long term. However, the short-term economic environment faces many disturbing factors, and the short-term market trend is still relatively complicated, possibly indicating that the downside cycle is not yet over and may lead to fluctuations in the future.

AtLong-term bullish trends, short-term fluctuations,in the market environment, two directions can be considered.

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