Hong Kong stocks surge in September! What's next? How to invest?

In September 2024, the Hong Kong stock market emerged as one of the best-performing stock markets globally. The Hang Seng Index has increased by 12.62% over the past month, outperforming the 2.74% rise of the S&P 500 index in the U.S. Stock market.

Why has the Hong Kong stock market performed well recently? How can investors approach this market? What are the advantages of investing in Hong Kong stocks? This article aims to provide answers to these questions.

What's behind the recent surge in Hong Kong stocks?

There are a few reasons for this recent surge:

1. U.S. Federal Reserve Rate Cuts: The Fed's decision to lower interest rates may lead to more international investment in global markets, including Hong Kong, as investors search for better returns.

2. China's Stimulus Policies: China has introduced several measures to boost the economy, such as cutting interest rates and lowering mortgage rates. These actions could encourage consumer spending and help the economy grow.

3. Strengthening Renminbi: As the Fed lowers rates, the U.S. dollar has weakened, leading to a stronger renminbi. This shift can positively impact Chinese stocks.

How to invest in Hong Kong stocks?

With the market moving quickly, many investors may feel unsure about what to buy. If you believe in the future performance of Hong Kong stocks but don’t know which individual stocks to choose, consider investing through index ETFs (Exchange-Traded Funds).

Just like the U.S. investors can buy ETFs tracking the S&P 500 index or Nasdaq 100 index. You can find ETFs that track the Hang Seng Index in Hong Kong.

You can use moomoo to find ETFs that follow the Hang Seng Index. Among all the ETFs tracking the index, the most representative and largest by asset size is the $TRACKER FUND OF HONG KONG (02800.HK)$.

Established in 1998 during the Asian financial crisis, it was the first ETF in the Hong Kong market and is a common choice for new investors.

The Tracker Fund aims to replicate the performance of the Hang Seng Index. As of September 25, 2024, it has been performing slightly better than the index itself.

The top five holdings in the Tracker Fund include well-known companies such as $TENCENT (00700.HK)$, $HSBC HOLDINGS (00005.HK)$ ,$BABA-W (09988.HK)$, $AIA (01299.HK)$, and $MEITUAN-W (03690.HK)$. By investing in an ETF that tracks the Hang Seng Index, you effectively invest in a diversified basket of companies listed in Hong Kong.

What's next?

Many investors are likely wondering how far this rally can go and whether there are useful indicators to assess potential reversal points.

The Fibonacci extension tool is an excellent technical analysis tool that can help identify potential price targets.

Investors can find the Fibonacci extension feature in the drawing tools on moomoo. By connecting points A, B, and C on the chart, you can identify key ratios (such as 38.2% and 61.8%) to analyze potential support and resistance levels, aiding you in setting profit-taking targets.

You can check out this article for specific instructions: Using Fibonacci extensions in trend trading

For example, the Hang Seng Index hit a low of 14,794 points (Point A) in January 2024 and then began to recover, reaching a peak (Point B) in April before undergoing a correction, which ended in August (Point C), continuing the previous trend.

Using these points, you can establish a Fibonacci extension line to identify key levels, including 38.2%, 50%, 61.8%, and 100%. Investors can use these points to gauge potential price targets following the trend. If the price breaks through a specific percentage level, keep an eye on the next level for further insights.

However, it's important to remember that technical indicators should only be used as a supplementary tool. There are many factors influencing the stock market, and significant fluctuations are commonplace. If you plan to chase short-term gains, setting stop-loss orders can help manage risks and limit potential losses.

Advantages of investing in Hong Kong stocks

• Convenient location and time zone: The Hong Kong stock market is in Asia, with trading hours that align well with other Asian markets, making it easier for Asian investors to participate.

• Lower valuations: Generally, Hong Kong stocks have lower valuations compared to U.S. stocks, which may attract investors looking for value.

In summary

The Hong Kong stock market has performed well in September 2024, mainly due to the U.S. Federal Reserve's rate cuts, China's stimulus measures, and a stronger renminbi. If you're considering investing in Hong Kong stocks, think about buying ETFs that track the Hang Seng Index, like the Tracker Fund, which allows you to invest in multiple companies at once.

However, keep in mind that investing in stocks comes with risks. While the current market looks good, stock prices can fluctuate significantly. Changes in policies, economic data, and international conditions can all impact stock prices. Be sure to do your research before investing, and consider setting stop-loss orders to manage your risks effectively. Overall, Hong Kong's low valuations and strategic location make it an attractive option for many investors.