However, despite the recent market adjustment, there are still many positive factors behind the Hong Kong stock market. One notable phenomenon is that the capital from the south continues to be active recently, showing a trend of "buying more as it falls." Data shows that on the day of the major drop in the Hong Kong stock market on November 14, the southbound Hong Kong Stock Connect funds had a net inflow of 19.656 billion Hong Kong dollars, marking the second largest net daily inflow so far this year.

Another positive factor benefiting Hong Kong stocks is the further steady growth in the performance of leading companies.

Hang Seng Tech Index re-enters a "technical bear market".

Hong Kong stocks have entered a downward trend over the past few trading days.

Data shows that with the significant drop in the Hong Kong stock market on November 14, the Hang Seng Tech Index has fallen more than 20% from its high in October this year, once again entering a "technical bear market." The index briefly entered a "technical bear market" on October 17 but quickly rebounded.

Other major Hong Kong stock indices have also performed poorly recently. For example, the Hang Seng Index closed down by 1.96% on November 14, marking the index's fifth consecutive trading day decline. The lowest intraday price on that day was down by 16.56% from its high in October. The Shanghai-Hong Kong Stock Connect Index (H50069) fell by 1.82% on November 14, with the intraday low down by 16.26% from its high in October.

In terms of individual stocks, most Hong Kong stocks have retreated to varying degrees from their highs of October. Data from Wind shows that out of the 82 constituent stocks in the Hang Seng Index, 71 stocks have retreated more than 10% from their highs in October, with 46 stocks experiencing a retreat of over 20%. Among them, shares of Longfor Group, Ali Health, Wuxi Bio, New World Development, Baidu Group-SW, CSPC Pharma, NIO Inc., Xinyi Solar, JD Health, Wuxi Apptec, and Bud APAC have retreated by more than 30% from their highs in October.

Why did the adjustment occur?

The reasons for the recent adjustment in the Hong Kong stock market are varied, with different views in the market. However, there are some factors worth noting.

Firstly, before the sharp increase that started in September this year, the overall performance of the Hong Kong stock market was lackluster, accumulating a significant number of trapped positions. With the violent surge of the Hong Kong stock market in September and October, there has been significant pressure from profit-taking and unwinding positions.

In fact, despite the recent adjustments in the major Hong Kong stock indices, they still have good gains compared to the lows of September. For example, the Hang Seng Tech Index is currently up 26.88% from the lows in September this year.

Secondly, influenced by various factors such as the financial reporting period, some Hong Kong companies have suspended their share buyback programs recently. For example, Tencent Holdings suspended its share repurchase from October 9 this year until the performance disclosure date of the third quarter of 2024, for about a month. Meituan also suspended its share repurchase activity after September 26 this year. However, as some companies pass the financial reporting period or their stock prices enter a more favorable range in terms of cost-effectiveness, these companies may resume their share buyback activities.

There are still many positive factors behind the Hong Kong stock market.

Despite the recent market adjustments, there are still many positive factors behind the Hong Kong stock market.

One noteworthy phenomenon is that the inflow of Southbound funds has remained strong in recent times. Data shows that on the day of the sharp decline in the Hong Kong stock market on November 14, there was a net buying of 19.656 billion Hong Kong dollars through the Southbound Stock Connect, marking the second-largest single-day net buying amount this year. Just recently on November 6, when the Hang Seng Index fell sharply by 2.23%, Southbound fund flow through the Stock Connect recorded a net buying of 21.487 billion Hong Kong dollars, marking the largest single-day net buying amount for the year.

Since November this year, in less than half a month, the net inflow of funds through the southbound Hong Kong Stock Connect amounted to 71.345 billion Hong Kong dollars, which is close to the total net inflow for the previous month and significantly higher than the total net inflow in September this year.

Another positive factor favoring Hong Kong stocks is the further steady growth of leading companies' performance, providing a good fundamental outlook for the Hong Kong stock market.

For example, Tencent's financial report for the third quarter of 2024 showed a revenue of 167.193 billion yuan, an 8% year-on-year increase. The gross profit and operating profit (Non-IFRS) were 88.828 billion yuan and 61.274 billion yuan, respectively, with a year-on-year increase of 16% and 19%. JD.com announced its performance for the third quarter of 2024 on November 14, with revenue of 260.4 billion yuan, a 5.1% year-on-year increase, and a net income attributable to ordinary shareholders of the company of 11.7 billion yuan, up 47.8% year-on-year.

Editor/Lambor