Capital Drives Technical Bull Market in Hong Kong Stocks (AI Translation)
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文｜财新周刊 王小青（发自香港）
By Caixin Weekly's Wang Xiaoqing (Reporting from Hong Kong)
低迷长达四年的香港股市，终于在2024年4月中旬至5月中旬，迎来一波逾20%的强劲反弹。恒生指数本轮上涨峰值较年初低位，累计升幅高达33%。
After four years of sluggish performance, the Hong Kong stock market finally saw a robust rebound of over 20% from mid-April to mid-May 2024. The Hang Seng Index surged to a peak, recording an impressive cumulative rise of 33% from its low at the beginning of the year.
港股快速反弹，对应着恒指风险溢价已从反弹前期的8.8%快速降至最低6.7%，突破2023年7月中央政治局会议前的低点，也低于2015年以来7.0%的均值水平；在盈利与无风险利率变化不大的背景下，风险溢价收敛基本上贡献了全部涨幅。
Hong Kong stocks have rapidly rebounded, with the Hang Seng Index's risk premium quickly dropping from 8.8% in the early stages of the rebound to a low of 6.7%. This has surpassed the previous low before the Chinese Politburo meeting in July 2023 and is below the average level of 7.0% since 2015. In the context of relatively stable earnings and risk-free interest rates, the convergence of the risk premium has essentially contributed to the entire rise.
5月中旬，恒指冲高至19700点后回落，目前在18000点附近震荡。2024年前五个月，恒指累计涨幅为6.1%，国企指数累升10.8%，恒生科技指数下跌约2%。
In mid-May, the Hang Seng Index surged to 19,700 points before retreating, currently oscillating around the 18,000 mark. For the first five months of 2024, the Hang Seng Index has cumulatively increased by 6.1%, the China Enterprises Index has risen by 10.8%, while the Hang Seng Tech Index has declined by approximately 2%.
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- **Market Surge:** The Hong Kong stock market rebounded over 20% from mid-April to mid-May 2024, and the Hang Seng Index saw a cumulative rise of 33% from its yearly low.
- **Investment and IPO Activity:** Foreign capital inflow increased notably, IPO activity picked up with 21 new listings raising HK$9.6 billion in the first five months of 2024.
- **Future Outlook:** Analysts and investment banks predict further gains, depending on upcoming Chinese economic policies and global interest rate movements.
The Hong Kong Stock Market has experienced significant growth after a prolonged period of stagnation, marked by a resilient rebound of over 20% from mid-April to mid-May 2024 [para. 1]. The Hang Seng Index (HSI), which climbed from 14,961 in January to 19,706 in May, has recorded a cumulative rise of 33% from its low at the start of the year [para. 1][para. 3]. Financial institutions have become more optimistic, predicting further increases in the Hang Seng Index by the end of 2024 [para. 13][para. 15].
During this rebound phase, foreign capital has started to re-enter the market, with hedge funds and emerging market-focused funds slightly increasing their positions in Chinese stocks [para. 5]. Nevertheless, global long-only funds are yet to make significant shifts [para. 6]. Deutsche Bank, UBS, and Morgan Stanley have revised their year-end targets for the HSI, citing economic stability and positive market sentiment [para. 13][para. 15]. The recent measures by the Chinese government to stimulate economic growth, particularly in the property market, have cultivated increased confidence among investors [para. 19][para. 25].
Additionally, the secondary market of Hong Kong stocks has displayed a warming trend, with 21 new stock listings raising about HK$9.6 billion in the first five months of 2024, albeit lower than the HK$15.8 billion raised from 17 new listings in the same period in 2023 [para. 19]. A notable rule change, Chapter 18C, was introduced to facilitate the listing of specialized technology companies, further boosting market optimism [para. 39]. Deloitte estimates that IPO fundraising in Hong Kong in 2024 will reach about HK$100 billion, though interest rate movements in the U.S. remain a key determinant [para. 42].
Foreign capital has continued to flow into Chinese stocks, despite a challenging investment environment, with nearly 800 foreign active institutions holding Chinese stocks below their benchmark positions [para. 49][para. 57]. An upswing occurred in mid-to-late April after U.S. Treasury Secretary Janet Yellen's visit to China, which sparked rumors of government measures to address the real estate sector [para. 61]. The Central Political Bureau meeting in April further bolstered market sentiment by demonstrating the government's commitment to economic growth [para. 63].
Southbound capital through the Stock Connect program has also significantly contributed to the rally, with mainland funds' net inflows into Hong Kong stocks reaching HKD 321.3 billion by June 2024 [para. 75]. Additionally, improvements in market sentiment and government fiscal policies have increased foreign investor confidence [para. 81]. UBS highlighted potential further gains in Hong Kong stocks, contingent on strong corporate earnings and positive economic indicators [para. 88][para. 92].
However, concerns about the sustainability of the rebound persist. Factors such as the pace of interest rate changes in the U.S. and deflationary pressures in the Chinese economy play crucial roles [para. 116][para. 119]. The Federal Reserve's decisions on interest rates and U.S.-China relations add layers of complexity to market forecasts [para. 151][para. 158].
A significant upcoming event that investors are eyeing is the Third Plenary Session of the 20th Central Committee, scheduled for July 2024. This session is expected to focus on various reforms, including economic and governance restructuring, potentially impacting the market considerably [para. 180][para. 185]. Alongside these developments, measures to boost Hong Kong's capital market, such as ETF Connect expansion and support for mainland companies to list in Hong Kong, are anticipated to provide long-term support [para. 189][para. 196].
While the market remains cautiously optimistic, it is influenced by several factors that could either sustain the current rebound or serve as points of resistance. The upcoming policy decisions, particularly those from the Third Plenum and mainland government, will be pivotal in shaping the future trajectory of the Hong Kong stock market [para. 210].
- Deutsche Bank
德意志银行 - Deutsche Bank has been bullish on Chinese stocks since February 2024. They predict that the Hang Seng Index will reach 21,500 points by the end of 2024. The bank acknowledges that small-scale continuous stimulus measures may be underestimated by investors, who often compare them to large-scale initiatives in Western countries.
- Morgan Stanley
摩根士丹利 - Morgan Stanley initially lowered its year-end target for the Hang Seng Index (HSI) to 16,000 points but revised this outlook mid-2024. The bank raised its target for mid-2025 to 19,150 points, with an optimistic scenario predicting up to 22,500 points. They highlighted that the HSI's rebound has largely priced in macroeconomic stabilization and policy improvements, suggesting future movements might be range-bound rather than continuous climbs.
- Jingtai Technology
晶泰科技 - Jingtai Technology, an AI drug development unicorn, is set to go public as the first company under Hong Kong Exchange's new listing rules for unprofitable specialist technology firms (Main Board Listing Rules Chapter 18C) in early June 2024.
- BNP Paribas
法国巴黎银行 - BNP Paribas mentioned in the article notes that the April Central Political Bureau meeting showcased China's firm commitment to stimulating economic growth and discussed potential measures to reduce real estate inventories. This has bolstered investor confidence in the Chinese market.
- ChinaAMC (Hong Kong)
华夏基金（香港） - The article does not mention specific information about ChinaAMC (Hong Kong). It discusses the recent performance and future outlook of the Hong Kong stock market, the impact of external and internal factors, and the involvement of various investment funds and policies, but it does not provide details about ChinaAMC (Hong Kong).
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