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joined discussion · Jul 4, 2022 20:26

FinVergence Review | Looking back at the first half of the global capital markets, the scenery here is uniquely splendid

The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
The stocks with the highest market value in the US, Hong Kong, and Chinese mainland stock markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37%,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date.
Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a turnaround in performance, while Apple has seen a major pullback amid pressure on the stock market from US interest rate hikes. Tencent has also suffered due to the reduction of holdings by its major South African shareholder, who needs to cash out to support other loss-making investments.
From these subtle signs, it can be seen that Chinese assets are starting to gain favor with international capital. This is evident from Guizhou Maotai's recent frequent增持 by southbound funds. It can also be inferred from the fact that Tencent's major shareholder had to reduce holdings to sustain other investments, indicating the strong momentum of appreciation in Chinese assets. No wonder some Wall Street firms suggest that Chinese stocks may become a safe haven.
The tide changes, when will it reach A-shares and Hong Kong stocks? Soon.
The sun rises in the east while it rains in the west.
Half of 2022 has already passed, and the first half of the year saw tremendous volatility in global capital markets. The primary concerns remain inflation, supply chains, and geopolitical issues.
The inflation problems in Europe and the United States can no longer be taken lightly. With the persistent widening of energy and food supply-demand gaps, both the U.S. and Europe have witnessed soaring inflation rates.
The three factors of inflation, supply chain, and geopolitics are intertwined, and a solution seems elusive: Geopolitical tensions have further exacerbated supply chain disruptions through supply and transportation channels, thereby continuously widening the global commodity supply-demand gap. This has also triggered rising manufacturing costs, worsening supply issues, and further driving up inflation rates.
In response to rising inflation, Western central banks have tightened monetary policies; the Bank of England has raised interest rates consecutively, the Federal Reserve has begun increasing the magnitude of rate hikes, and the European Central Bank has turned hawkish, signaling potential rate hikes starting in the second half of the year. All these moves have inevitably raised concerns in the capital markets about whether a hard economic landing is imminent.
The U.S.'s recent stance inevitably leads to this association: There are indications that the U.S. may go to any lengths to suppress inflation, bringing it under control before turning attention back to economic growth.
The quickest tool to suppress inflation is tightening monetary policy, including raising interest rates and reducing liquidity, which lowers consumer demand or temporarily alters consumption habits by increasing financing costs and opportunity costs, thus narrowing the supply-demand gap.
These traditional methods may have some effect but also bring side effects, including possible economic contraction, reduced willingness of businesses to invest, and decreased overall consumer demand as people become less willing to spend.
These measures might restore the balance between production and demand, but there is also the risk of overcorrection. Under cost pressures, companies may drastically cut production capacity and output, leading to stagflation — where the economy stagnates while inflation remains stubbornly high.
These concerns have already been reflected in the performance of the capital markets.
US stocks that performed exceptionally well in 2020 and 2021 have accumulated double-digit declines in the first half of this year. The Dow Jones, Nasdaq, and S&P 500 indices fell by 15.31%, 29.51%, and 20.58% respectively, with the second quarter seeing much steeper declines than the first quarter—dropping 11.25%, 22.44%, and 16.45% respectively. The Federal Reserve's aggressive interest rate hikes in the second quarter are gradually being reflected in the stock market.
In contrast, the A-share and Hong Kong stock markets saw a turnaround opportunity in the second quarter due to China’s countercyclical measures, which may have buffered the impact of changes in the international economic environment to a certain extent.
China introduced several measures to encourage economic development, including lowering borrowing costs for small, medium, and micro enterprises, promoting consumption through various regional initiatives, and regulating and encouraging the development of platform economies, all of which contribute to boosting consumption and ensuring steady economic growth.
Moreover, the earlier antitrust investigations and regulations on large internet companies have largely been settled, laying the foundation for the healthy development of the industry.
On the other hand, encouraging foreign trade activities, as well as the US potentially easing tariffs under inflation pressure, will benefit China's export growth and drive external circulation.
As a result, the A-share and Hong Kong stock markets have embarked on independent rallies.
During the second quarter when US stocks plummeted, major A-share indices posted gains: the Shanghai Composite Index, Shenzhen Component Index, and STAR 50 Index rose by 4.50%, 6.42%, and 1.34% respectively in Q2. Hong Kong stocks also outperformed US equities in Q2, with the Hang Seng Index slightly down 0.62%, while the Hang Seng Tech Index gained 6.85%. See the chart below.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
A-shares raise largest scale of funds
The performance of the secondary market has quickly transmitted to the primary market.
1. The sun no longer rises on US stocks
The sharp decline in the US secondary stock market has dampened enthusiasm for IPOs and post-listing financing activities. In the first half of 2022, funds have shied away from high-risk SPAC transactions (blank-check companies that raise capital first and then seek operating businesses to merge with for listing). This is partly because interest rate hikes have increased the cost of capital, significantly raising the demand for risk-adjusted returns. Additionally, the weak performance of the secondary market has left investors disinterested in new stock and SPAC activities.
Wind data shows that in the first half of 2022, the scale of IPO financing in the US stock market was $16.455 billion (approximately RMB 110.3 billion), representing just 5.15% of last year’s total IPO financing; the scale of post-listing financing was $10.278 billion (approximately RMB 68.9 billion), equivalent to 10.40% of last year’s total. The combined financing scale amounted to $26.733 billion (approximately RMB 179.2 billion), or 6.39% of last year’s total.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
2. A-share market stands out uniquely
Wind data indicates that from the beginning of 2022 to July 4, the A-share market's IPO fundraising reached RMB 315.7 billion, already accounting for more than half (approximately 58%) of last year’s total IPO fundraising amount of RMB 542.7 billion; post-listing fundraising may reach RMB 238.6 billion; the combined fundraising is expected to reach RMB 554.3 billion, all significantly higher than the fundraising amounts in the US stock market.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
Among A-share market IPO activities this year, the three largest IPOs in terms of financing scale are China Mobile (600941.SH), CNOOC (600938.SH), and Jinko Power (688223.SH), collectively raising nearly RMB 100 billion.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
In the A-share market's post-listing financing activities, CATL (300750.SZ) ranks as the largest so far this year, with a total fundraising amount reaching RMB 45 billion, see table below.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
3. Hong Kong stock market shows strong potential
The Hong Kong stock market's fundraising performance has been lackluster this year, with the main board IPO fundraising at only HKD 22.111 billion (approximately RMB 18.9 billion), while post-listing fundraising amounted to HKD 97.113 billion (approximately RMB 83 billion). The total combined fundraising might reach HKD 119.2 billion (approximately RMB 101.8 billion).
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
In the first half of 2022, four companies in the Hong Kong stock market opted for an introduction listing without raising funds through public offerings of shares. These include Nio-SW (09866.HK), which secondarily listed on both the Hong Kong Stock Exchange and the Singapore Exchange in the first half of 2022; Huaxin Cement (06655.HK, 600801.SH), expanding from the A-share market to the Hong Kong stock market; Conch Environment (00587.HK), introduced by its parent company through a spin-off listing; and KE Holdings-W (02423.HK), which returned from the US stock market to achieve dual primary listings in both regions.
Entering July, there has been a noticeable increase in companies planning to list in the Hong Kong stock market. From July 4 to July 18, the total planned initial public offering (IPO) fundraising of companies in queue almost matches the entire IPO fundraising total of the Hong Kong main board market in the first half of 2022, reaching HKD 19.245 billion. Notably, OneConnect Financial Technology (06638.HK), under Ping An (601318.SH, 02318.HK) and already listed in the US stock market, made its debut on the Hong Kong Stock Exchange Main Board via introduction on the first trading day (July 4) of the second half of 2022.
New stocks worth noting in early July include 'Lithium King' Tianqi Lithium (09696.HK) and high-end wealth management service provider Noah Holdings-S (06686.HK), which is returning for a secondary listing in Hong Kong.
In summary, the primary markets of US stocks, A-shares, and Hong Kong stocks in 2022 were influenced by the secondary markets: The A-share secondary market maintained positive growth in the first half of the year, ensuring the primary market outperformed US stocks, guaranteeing smooth initial public offerings and follow-on financing channels; the unvarnished performance of US stocks caused a significant pullback in the primary market, without the boost from SPACs, the fundraising ability of the US stock market appears weak; IPO activity in the Hong Kong stock market was not active in the first half of the year, but the rebound of the Hang Seng Tech Index in the second quarter also led to recovery in the second half, with financing activities significantly picking up in the first week of July.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
Looking ahead
Under inflationary pressure, the Federal Reserve may expand interest rate hikes in the second half of the year. This suggests that in the short term, US stocks will remain under pressure. In my view, the impact of interest rate hikes will continue to draw profits and interest-rate-sensitive funds away, so the downward trend in US stocks is likely to persist.
A-share and Hong Kong stock markets could become destinations for risk capital, because:
Low valuations.Data from Wind shows that the current P/E ratios of the CSI 300 and Hong Kong stocks are far lower than those of the three major US indices, as shown in the chart below. Notably, under China’s pro-economic policies, profitability of A-share and Hong Kong-listed companies is expected to remain stable. Conversely, under the pressure of the Federal Reserve's monetary policy and still-high inflation rates, US companies may struggle to maintain their 2021 profit performance. Stock prices could decline with earnings, lowering valuation expectations.
Therefore, relatively speaking, the low valuations supported by policies and economic development in A-shares and Hong Kong stocks might attract more capital.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
Support from favorable policies.Unlike the US, which spares no expense to fight inflation, China’s monetary policy retains considerable flexibility for adjustments and can continue to support robust economic growth. Additionally, expectations of the US easing tariffs, along with the potential relative trade advantage brought by the rising dollar as the US raises interest rates, should benefit China's export trade. Amidst a favorable domestic and international economic environment, China's economy is expected to sustain growth, and Chinese enterprises should follow suit.
Further optimization of the Stock Connect, facilitating foreign investment in A-shares and Chinese investment in Hong Kong stocks, enhancing interaction between the A-share and Hong Kong stock markets.
Funds trading through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect have become increasingly active. As shown in the figure below, the scale of net purchases by northbound funds has continued to rise in recent months, possibly reflecting increased foreign appetite for A-shares; as for southbound funds, every month in the first half of the year showed net inflows, indicating that southbound funds were mainly buying.
The highest market-cap stocks in the US, Hong Kong, and A-share markets:$Apple (AAPL.US)$Down 21.55% year-to-date,$TENCENT (00700.HK)$Down 21.37% cumulatively,$Kweichow Moutai (600519.SH)$Only slightly down 0.50% year-to-date. Since the beginning of this year, Guizhou Maotai has been heavily bought by northbound funds, showing a reversal in performance, while Apple has retreated significantly under the pressure of US interest rate hikes on the stock market, and Tencent has also been hit by the reduction of its stake by Naspers, which needs to cash out to revitalize other loss-making investments. These subtle signs indicate that Chinese assets are starting to gain favor with international capital, as evidenced by Guizhou Maotai's recent frequent acquisition by southbound funds, and also by the fact that Tencent’s major shareholder had to reduce its stake to sustain other investments, showing the strong appreciation potential of Chinese assets. No wonder some Wall Street giants suggest that Chinese stocks may become a safe haven. As the saying goes, 'The wheel of fortune turns,' when will it be A-shares and Hong Kong stocks' turn? It's coming soon. The sun rises in the east while it rains in the west Half of 2022 has already passed, with the first half of the year seeing significant turbulence in global capital markets. The main issues remain inflation, supply chains, and geopolitics. The inflation problem in Europe and the US can no longer be taken lightly. With the persistent widening gap in energy and food supply and demand, both the US and Europe have witnessed a steady rise in inflation rates. The three factors of inflation, supply chain, and geopolitics are intertwined, and it seems that no way out has been found yet: Geopolitical tensions, through supply and transportation...
Starting from July 4, ETFs (Exchange-Traded Funds) were officially included in the Stock Connect eligible securities, allowing all Hong Kong and overseas investors, including institutional and individual investors, to trade eligible SSE-listed ETFs under the Shanghai-Hong Kong Stock Connect and eligible SZSE-listed ETFs under the Shenzhen-Hong Kong Stock Connect.
Southbound individual investors meeting the conditions for participating in the Hong Kong Stock Connect transactions (i.e., combined assets in securities accounts and capital accounts not less than RMB 500,000) may buy four Hong Kong stock ETFs through southbound trading under the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect: Tracker Fund of Hong Kong (02800.HK), Hang Seng China Enterprises Index ETF (02828.HK), CSOP Hang Seng Tech ETF (03033.HK), and iShares Hang Seng Tech ETF (03067.HK).
The deepening of the Stock Connect can enhance liquidity in both markets, benefiting southbound funds investing in Hong Kong stocks as well as foreign investments in A-shares.
Considering the increasing risks in U.S. stocks, as well as the stability of Chinese companies' performance and the deepening of cross-border capital flow, the A-share and Hong Kong stock markets are expected to clear up and shine.
Mao Ting
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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