news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

The information disclosure mechanism for Hong Kong Stock Connect trading will soon be adjusted.

On July 26, the Shanghai and Shenzhen Stock Exchanges announced that the information disclosure mechanism for Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and Hong Kong-Shenzhen Stock Connect will be adjusted from August 19, 2024. After this adjustment, the most significant change is that the disclosure of southbound funds has been adjusted. When the remaining quota on the day is greater than or equal to 30%, it will be displayed as sufficient; when the remaining quota on the day is less than 30%, the remaining quota will be announced in real time. Unlike northbound funds, southbound funds will still disclose intraday transaction data, etc.

According to industry insiders, the market has already anticipated the adjustment of the information disclosure mechanism for southbound funds. As early as April 12, the Shanghai and Shenzhen Stock Exchanges announced the adjustment of the information disclosure mechanism for the Shanghai-Hong Kong Stock Connect transactions, which was clearly stated on August 19.

Several private equity fund professionals in China revealed to reporters that the fact that southbound funds no longer disclose real-time data during trading has little impact on their Hong Kong stock investment strategies. The reason is that they are currently focusing on the valuation depression effect of Hong Kong stocks and adopt a buy-and-hold strategy, waiting for the valuation of Hong Kong stocks to rise to a reasonable level before considering profit exit. Therefore, the fact that southbound funds no longer disclose real-time data during trading has little disturbing effect on their investment strategies.

A Hong Kong private equity fund manager also believes that given the relatively low liquidity of Hong Kong stocks, there is little room for medium and low-frequency quantitative trading, so the Hong Kong stock market is relatively less sensitive to the fact that southbound funds no longer disclose real-time data during trading.

"At present, local investment institutions in Hong Kong pay more attention to the overall net inflow trend of southbound funds, which serves as a major basis for them to assess the future upside potential and investment profit opportunities of some Hong Kong stocks," he told reporters.

Data shows that as of the close of July 29, the net inflow of southbound funds since July was approximately HK$46 billion, and the cumulative net inflow so far this year has reached approximately HK$417.4 billion, exceeding HK$318.842 billion in 2023 and HK$386.281 billion in 2022.

Many industry insiders said that even if southbound funds no longer disclose real-time data during trading, it will be difficult to "affect" the trend of continued net inflows of southbound funds.

Wang Jian, investment director of China Europe Fund, said that the current Hong Kong stock sector has a high valuation appeal. From a macro perspective, global liquidity has reached a turning point with the Fed's policy, and the market's expectations of the Fed's interest rate cut are gradually returning to reality, and the interest rate gap between China and the United States is expected to narrow. As a global value depression, the capital side of Hong Kong stocks may usher in substantial improvement. After three years of adjustment, the valuations of sectors such as Hong Kong stocks' Internet platforms have been significantly underestimated, which is worth medium- and long-term layout.

An investment director of a domestic private equity fund told reporters that after southbound funds no longer disclose real-time data during trading, they may make some adjustments to their investment strategies, such as increasing investment in high-dividend Hong Kong stocks. In the past, the disclosure of real-time data during trading by southbound funds may have caused certain fluctuations in the share prices of high-dividend Hong Kong stocks, forcing them to consider potential investment risks and postpone investment. Now, their allocation to high-dividend Hong Kong stocks will become more resolute.

Domestic individual investors responded calmly

Many securities dealers pointed out that southbound funds no longer disclose real-time data during trading, and it has little impact on domestic individual investors (investing in Hong Kong stocks through the Hong Kong Stock Connect).

"We were worried that this move might reduce the willingness of domestic individual investors to invest in Hong Kong stocks. In the past, they would pay attention to the real-time data disclosed by southbound funds to understand which Hong Kong stocks are being sought after by mainland funds, and use it as a reference for their follow-up investment," a securities industry insider told reporters. Therefore, he believes that the fact that southbound funds no longer disclose real-time data during trading may cause some domestic individual investors to lose their sense of direction in Hong Kong stock investment.

Through small-scale market research, they found that most domestic individual investors "don't care" that southbound funds no longer disclose real-time data during trading.

Behind this is the increasingly "rational" investment strategy of domestic individual investors in Hong Kong stocks. As Hong Kong stocks are undervalued, they mainly adopt a value investment strategy, buying and holding high-dividend Hong Kong blue-chip and red-chip stocks, and waiting for the stock prices of these stocks to rise to a reasonable range before considering selling for profit.

"Recently, many domestic individual investors have shown strong investment interest in Hong Kong stocks with strong repurchase momentum," the securities industry insider revealed.

Data shows that as of July 28, a total of 206 Hong Kong-listed companies have implemented share buybacks, 83 more than the same period last year; the total buyback amount is HK$153.891 billion, up 170.37% from HK$56.918 billion in the same period last year. Both of the above data set a record high for the same period in history.

After buying Hong Kong stocks with strong repurchase capacity, domestic individual investors did not follow the changes in market trading sentiment and the real-time data disclosed by southbound funds to conduct frequent short-term trading, and also adopted a buy-and-hold strategy and wait for the price to rise before selling.

In the view of the above-mentioned securities firm personnel, once southbound funds no longer disclose real-time data during trading from August 19, some domestic individual investors may feel a little uncomfortable in the short term, such as difficulty in timely discovering new Hong Kong stock investment hotspots and abnormal fund movement trends. But overall, as long as they continue to adhere to the value investment strategy, the relevant "discomfort" will soon dissipate.

"Recently, affected by the increased volatility of the A-share market, some high-net-worth investors have also increased their holdings in Hong Kong stocks," he pointed out. The reason is that these high-net-worth investors believe that the Fed's interest rate cut is imminent, and Hong Kong stocks may benefit first. Although it is difficult for them to understand the real-time data of southbound funds after August 19, as long as they buy high-performing Hong Kong-listed companies, they will have a higher chance of making a profit.

Why Institutional Investors Remain Calm in the Face of Change

Compared with the "calmness" of domestic individual investors, most institutional investors are also "unsurprised" by the fact that southbound funds no longer disclose real-time data during trading.

Many private equity fund professionals in China told reporters that they have not paid attention to the real-time data of southbound funds for quite a long time. The reason is that this data is not of much reference value for their implementation of Hong Kong stock value investment strategy.

"Compared with the real-time data of southbound funds, we pay more attention to the fundamentals and industry growth space of Hong Kong-listed companies, as well as the financial status of companies and the effectiveness of ESG implementation," a person in charge of a domestic subjective strategy private equity fund told reporters. Perhaps the real-time data of southbound funds may affect stock prices in the short term, but in the medium and long term, the decisive factors affecting the stock price performance of Hong Kong-listed companies are still the growth rate of revenue and profits and the compliance status of listed companies.

A director of investment research at a domestic quantitative strategy private equity fund told reporters that they had previously considered conducting medium- and low-frequency quantitative strategy trading in Hong Kong stocks, which required real-time data of southbound funds as an important component of liquidity factors. However, they soon discovered that the overall liquidity of Hong Kong stocks was insufficient to support the implementation of medium- and low-frequency quantitative strategy trading.

In his opinion, the current value depression effect of the Hong Kong stock market is more suitable for value investing.

The reporter learned from various sources that many domestic investment institutions are still adopting a buy-and-hold strategy to increase their holdings of Hong Kong stocks. In particular, for Hong Kong stocks in the Internet and other technology sectors, they pursue a strategy of buying more as the price falls.

Invesco Great Wall Fund Manager Zhan Cheng believes that the Hong Kong stock Internet sector, as a representative of the main line of recovery, has experienced multiple negative factors such as policy regulations, delisting risks, and fluctuations in Sino-US relations. Its valuation has reached the historical bottom, but its performance has gradually entered a recovery range after bottoming out in the second quarter of 2022.

"Overall, the fact that southbound funds no longer disclose real-time data during trading has little impact on our investment strategy," said the head of the aforementioned domestic subjective strategy private equity fund. Some investment institutions even welcome the relevant departments to take such measures, because it helps reduce market disturbances and the risk of abnormal fluctuations in Hong Kong stock prices, making the valuation of holdings and product net value fluctuations of Hong Kong stock value investment strategies more stable.